How Will The Expiring Bush Tax Cuts Affect You?

Discussion in 'Economy' started by hvactec, Jul 23, 2011.

  1. hvactec
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    hvactec VIP Member

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    (The 10% bracket would disappear, and those taxpayers would move up to the 15% bracket, which would apply to all incomes below $34,550. The other tax rates would increase to 28%, 31%, 36% and 39.6% for the highest earners making more than $379,650.)

    Find out which expiring tax cuts might cost you money if Congress doesn't extend them.

    Most Americans have a fairly strong opinion of former President George W. Bush, either for or against his eight-year reign. One thing that all Americans can agree on, however, is that he was a serial tax cutter, with tax reduction as one of the cornerstones of his economic policy. Many of these tax cuts were enacted with sunset provisions, meaning they were embedded with predetermined expiration dates, many of which are coming up in 2011 and 2012. These sunset provisions were placed in the tax laws in some cases to garner enough legislative support to get the bills passed, or to get around rules that existed on cutting revenue without passing an offsetting spending cut.

    Major Legislation
    The two major tax-cutting bills from the Bush era were the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and the Jobs and Growth Tax Relief Reconciliation Act of 2003.

    These two laws cut taxes across the board for earned income, long-term capital gains and dividends. The legislation also expanded the child tax credit and made dozens of other changes and adjustments to the tax code, involving exemptions, deductions and the marriage penalty.

    Tax Brackets
    EGTRRA created six tax rate brackets--10%, 15%, 25%, 28%, 33% and 35%, based on income levels. If no extension is passed and signed into law, then the pre-2001 tax rates will go back into effect starting in tax year 2011. The 10% bracket would disappear, and those taxpayers would move up to the 15% bracket, which would apply to all incomes below $34,550. The other tax rates would increase to 28%, 31%, 36% and 39.6% for the highest earners making more than $379,650.

    Child Tax Credit
    One major provision that will expire at the end of 2010 is the child tax credit, which EGTRRA doubled from $500 to $1,000 per child. Unless Congress votes to extend the child tax credit, the maximum amount will revert back to $500 for tax year 2011, and the number of families eligible for that amount will be much less as tougher eligibility standards that existed prior to EGTRRA will go back into effect.

    Capital Gains/Qualified Dividends
    The maximum tax rate on long-term capital gains and qualified dividends were also reduced to 15%, with lower income filers facing a 0% tax rate. The sunset provisions would move the capital gains rate back to a maximum of 20%, and qualified dividends would resume being taxed at the regular tax rate of the filer, or as high as 39.6%.

    Marriage Penalty
    EGTRRA also eliminated the so-called "marriage penalty" and gave a married couple filing jointly a standard deduction twice that of a single filer. Tax rates were also adjusted for joint filers to remove the penalty. These provisions are set to expire as well.

    read more How Will The Expiring Bush Tax Cuts Affect You? - Forbes.com
     
  2. Mr. H.
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    Mr. H. Diamond Member

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    I thought it was a given that they are in fact being extended.
     
  3. Mr Clean
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    Mr Clean Gold Member

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    For the average middle class worker, tax cuts or increases don't amount to much; maybe a few bucks in either direction and certainly nothing life changing.
     
  4. hvactec
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    hvactec VIP Member

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    So basically if someone is making 34,500 there tax of 10% (tax 3,450.00) Will now go to 15% (tax 5,175.00) +4 dollar milk, bread, gas
     
  5. Mr Clean
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    Mr Clean Gold Member

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    $34,500 a year is not an average middle class income.
     
  6. iamwhatiseem
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    iamwhatiseem Gold Member

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    There is no such thing as "average middle class worker".
    That definition means different things to different people.

    However, in one respect you are correct, for the bottom 53% - nothing will change because they pay no income taxes at all.
     
  7. elvis
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    elvis BANNED Supporting Member

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    Mine will go up $2500.
     

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