Posted on 11/08/2006 6:33:46 AM PST by sr4402
OK folks, I've been searching the web for what will happen on April 15, 2007. One site said to decrease your exemptions and increase withholding. What is the prognosis for Federal Taxes? Will the Marriage Penalty be back? College Tuition deductions lost? Overall taxes raised because no tax cuts any more?
Nope...veto.
Tax rates stay the same through 2008. Estate and capital gains (and perhaps dividends) go up after 2010.
But I think Pelosi et al, will just not bring the subject up and let it expire. They don't have the guts to bring it to a vote and vote against it.
Tax cuts are history. The dimos dont have to make a move to raise taxes, all they gotta do is let them run out.
Yes. The Bush Taxcuts will start expiring. They will never be renewed by a Democrat Congress. Start digging deep people. EVEN if the President vetos everything, your taxes are going up.
I'm just compiling an email to my brother (his political beliefs have changed since marrying a New Jersey liberal) and would like to mention the tax changes that will occur because the breaks were not permanent.
Marriage penalty back
College tax credit gone
Death tax (2010)
What else?
You must be smokin some good stuff this morning.
If the Democrats are smart (and I have read some indications that they will do this), they will make a play for tax reform that maintains or lower tax rates for the poor and middle class (<$100k). They will increase the rats of the rich. This will keep the moderate independents or squishy middle at bay with the Democrats. Nancy Pelosi has already stated this...
Better be!
I found this on Heritage's website. It's from last year, so I don't know what changed this year. But it's a good place to start:
• Bonus Depreciation: This provision, which changes depreciation schedules for businesses in a way that encourages investment, expired on January 1, 2005.
• Alternative Minimum Tax: Exemptions will decrease by $6,500 per filer on January 1, 2006.
• Small Business Expensing: On January 1, 2008, the maximum amount that a business may deduct will fall from $100,000 to $25,000, which will not be indexed to inflation. Also on that date, the cap for the value of qualifying property will shrink from $400,000 to $200,000, making it more difficult for small businesses to take advantage of this deduction.
• Capital Gains: Rates will rise to 10 or 20 percent, depending upon income, on January 1, 2009.
• Child Credit: This credit will shrink from $1,000 to $500 per child on January 1, 2011.
• The 10-Percent Bracket: This bracket will be eliminated on January 1, 2011, raising the income tax burden of many workers by 5 percentage points.
• The 15-Percent Bracket for Joint Filers: On January 1, 2011, the upper limit of this bracket will shrink from 200 to 167 percent of the upper limit for single filers, creating a marriage penalty.
• Standard Deduction for Joint Filers: On January 1, 2011, this will shrink from 200 to 167 percent of the standard deduction for single filers, creating a marriage penalty.
• The Estate Tax: The top rate for this tax will increase to 60 percent on January 1, 2011, and the value of an estate exempt from taxation will shrink to $1 million, which is less than it is today.
• The Income Tax: Rates will increase between 3 and 4.5 percentage points in each bracket on January 1, 2011.
• Dividends: Rates will rise to match standard income tax rates on January 1, 2009.
Excellent stuff, exactly what I needed. Now if I can get some confirmation on the College Tuition Deduction.
Currently my husband and I are in the 25% bracket. If our income doesn't change much, we can expect our tax rate to remain the same until 2011, correct? Then it would go up to 28.5-29%? We also want to set up a retirement 403b - it's like a 401k only for public school teachers (husband's job), and a CD (for our first home down payment - we're in our late 20s but won't be able to buy a house til I finish grad school in 3-4 years). How will these investments be impacted by the capital gains?
Sorry I'm such a novice about investing - and you sound like you know what you're talking about :-)
I actually have no idea what I'm talking about. Just knew that Heritage Foundation would have some information on it.
As far as home loans, stay away from Interest Only loans like the plague unless you have lots of variable income and have the discipline to kill loans fast. Interest only loans went up recently and a lot of young folks are hurting, big time, right now.
Try to put 5% or more on your down payment. The idea is that if you have to bail out of the home, you might not get stuck with a leftover loan (or at least not a big one). Many folks put nothing down and upon attempting to bail out find they are saddled with a nastly loan even after they have sold the place.
One last word of advice "Choose Wisely". If you do, you won't regret it. If you don't you will.
Thanks for your advice. We want to have a 403b set up by the end of the year. Unfortunately my husband's employer does not do any matching, since it's a public school district with pensions. I'm not too happy about it - who wants their retirement funds being managed by the state of NJ? But there's nothing we can do about it. We're looking at retirement with the view that we will not be able to depend on the pension or SS for any income - SS will be broke before we're retirement age. I look at that money as just one more welfare tax that I'm not going to see again.
I'm in grad school and hopefully in 3-4 years will have a job as a professor. Depending on where I end up (public or private school), there might be 403b or 401k options I can start using. Also we hope to be in another state besides NJ, and the public school pension options for my husband may change at that point.
Since I'm not done with grad school, buying a home is a long way off. I'm not familiar with Interest Only loans - what exactly are those? I've heard bad things about adjusted rate mortgages, are these similar? We hope that when it comes time to buy a home we can get a good rate. We have zero debt and excellent credit. In the meantime we're putting all of my tiny TA salary into savings for a downpayment. We'd like to move it into a CD soon, but now I'm worried about how the new political situation could effect capital gains taxes. Would those even apply to a CD?
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