Thursday, August 5, 2010

Want To Start Understanding What Obama "Change" Means?

2011 Taxes

In just six months, the largest tax hikes in the history of
America will
take effect. They will hit families and small businesses in three great
waves on
January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for
investors, small business owners, and families.

These will all expire on
January 1, 2011:

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 two-thirds 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 an 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. The marriage penalty" (narrower tax
brackets for married couples) will return from the first dollar of income.
The child tax credit will be cut in half from $1000 to $500 per child. The
standard deduction will no longer be doubled for married couples relative
to the single level. The dependent care and adoption tax credits will be

The return of the Death Tax. This year, there is no death tax. For those
dying on or after
January 1 2011, there is a 55 percent top death tax rate
on estates over $1 million. A person leaving behind two homes and a
retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise
from 15 percent this year to 20 percent in 2011. The dividends tax will
rise from 15 percent this year to 39.6 percent in 2011. These rates will
rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare. Several will
first go into effect on
January 1, 2011. They include:

The "Medicine Cabinet Tax" Thanks to Obamacare, Americans will no longer
be able to use health savings account (HSA), flexible spending account
(FSA), or health reimbursement (HRA) pre-tax dollars to purchase
non-prescription, over-the-counter medicines (except insulin).

The "Special Needs Kids Tax" This provision of Obamacare imposes a cap on
flexible spending accounts (FSAs) of $2500 (Currently, there is no federal
government limit). There is one group of FSA owners for whom this new cap
will be particularly cruel and onerous: parents of special needs children.
There are thousands of families with special needs children in the
, and many of them use FSAs to pay for special needs education.
Tuition rates at one leading school that teaches special needs children
Washington, D.C. (National Child Research Center) can easily exceed
$14,000 per year. Under tax rules, FSA dollars can be used to pay for this type
of special needs education.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the
additional tax on non-medical early withdrawals from an HSA from 10 to 20
percent, disadvantaging them relative to IRAs and other tax-advantaged
accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011,
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
According to the left-leaning
Tax Policy Center, Congress' failure to
index the AMT will lead to an explosion of AMT taxpaying families-rising from
4 million last year to 28.5 million. These families will have to
calculate their tax burdens twice, and pay taxes at the higher level. The AMT was
created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.
Small businesses can normally expense (rather than slowly-deduct, or
"depreciate") equipment purchases up to $250,000. This will be cut all the way
down to $25,000. Larger business can expense half of their purchases of
equipment. In January of 2011, all of it will have to be depreciated."

Taxes will be raised on all types of businesses. There are literally
scores of tax hikes on business that will take place. The biggest is the loss
of the "research and experimentation tax credit," but there are many, many
others. Combining high marginal tax rates with the loss of this tax relief
will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for
tuition and fees will not be available. Tax credits for education will be limited.

Teachers will no longer be able to deduct classroom expenses. Coverdell
Education Savings Accounts will be cut. Employer-provided educational
assistance is curtailed. The student loan interest deduction will be disallowed
for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law,
a retired person with an IRA can contribute up to $100,000 per year
directly to a charity from their IRA. This contribution also counts toward an
annual "required minimum distribution." This ability will no longer be there.

PDF Version Read more:
Now your insurance is INCOME on your W2's.
One of the surprises we'll find come next year, is what follows - -

in 2011, (next year folks), your W-2 tax form sent by your
employer will be increased to show the value of whatever health insurance you

are given by the company. It does not matter if that's a private concern or

governmental body of some sort. If you're retired? So what; your gross will

go up by the amount of insurance you get.
You will be required to pay taxes on a large sum of money that you have

never seen. Take your tax form you just finished and see what $15,000 or

$20,000 additional gross does to your tax debt. That's what you'll pay next

year. For many, it also puts you into a new higher bracket so it's even

This is how the government is going to buy insurance for the 15% that

don't have insurance and it's only part of the tax increases.

Not believing this?
Joan Pryde is the senior tax editor for the Kiplinger letters. Go to

Kiplingers and read about 13 tax changes that could affect you.
Why am I telling you this? The same reason that I hope you forward this to

every single person that you know.
People have the right to know the truth because an election is coming in November.
Is this the change you voted for?
If not, I hope you'll remember the people in Congress that voted for this

"CHANGE" and help CHANGE their status in Congress.

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