Monday, January 23, 2012

T minus one year from some of the biggest tax hikes in American history

We are now within one year of several tax breaks for the American people being cutoff, and the population being assessed massive increases in several key areas.  Since Congress and the White House have failed to address even a new budget, the chances of them overturning, or remitting these tax increases becomes smaller and smaller.

First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for small business owners, families, and investors (later re-upped by President Obama and Democrat Congress in 2010). The following tax hikes will occur on January 1, 2013:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which the majority of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
- The 10% bracket rises to a new and expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%

Higher taxes on marriage and family.
Middle Class Death Tax.
Higher tax rates on savers and investors.
Second Wave: Obamacare Tax Hikes
There are twenty new or higher taxes in Obamacare. Some have already gone into effect (the tanning tax, the medicine cabinet tax, the HSA withdrawal tax, W-2 health insurance reporting, and the “economic substance doctrine”). Several more will go into effect on January 1, 2013. They include:

Medicare Payroll Tax Hike.
“Special Needs Kids Tax.”
Medical Device Tax.
“Haircut” for Medical Itemized Deductions.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2013, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year.
Full business expensing will disappear.
Taxes will be raised on all types of businesses.
Tax Benefits for Education and Teaching Reduced.
Charitable Contributions from IRAs no longer allowed. – Red Country

What used to be in your wallet?

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