Tuesday, February 8, 2011

Tax Law Changes 2011: A Laundry List of 2011 Tax Law Changes

No Changes to Tax Rates:
The new tax law averted an increase in the tax brackets. Low income taxpayers still help from the 10% bracket. High-income tax payers will remain in the 35% bracket. The marriage tax penalty, where married couples pay more as opposed to properties would if each person filed a single return, will be able to NOT return until 2013. Since most families require two incomes, this would hold penalized a large rate of American families.

Payroll Tax Cut:
The temporary tax rate extension passed in December 2010 included a new provision for 2011. All wage earners will see a temporary reduction in the payroll tax from 6.2% to 4.2%. This applies on up to the first $106,800 of W-2 or Self Employment income earned by each individual. For example, if you earn $106,800 per year this translates to a $2,136 savings. If you bring in $50,000 per year, this translates to a $1,000 savings.

Personal Exemption Phaseouts Delayed:
According to the tax law each person covered by a return entitles the tax payer to reduce their taxable income by $3,750. This remains the case for 2011 and 2012. However, starting in 2013, the customized exemption phaseout returns. Under presently rule, the amount you can contend starts decreasing around $166,000 and goes to zero by $291,000. This effectively serves as a stealth tax hike on middle and higher revenue taxpayers.

Itemized Deduction Limits Delayed:
The so-called "Pease" limits on itemized deductions own carried on repealed for 2011 and 2012. If you itemize your deductions, the amount you can deduct would suffer been phased out above a certain income amount ($169,750 for all returns). The reduction in the value of the itemized reduction can be up to 80% depending on your income level. This tax hike tends to punish people who pay egregious amounts of market taxes, live in astronomical cost-of-living areas, and even people who donate enormous sums to charity. Fortunately, right now scheme is planning to not return until 2013.
The Return of the etsta Tax

In 2010 the estate tax was repealed entirely, meaning any wealth you accumulated over your life could be passed tax-free to your heirs. But the current goes away in 2011, when the 35% tax on assets returns, in on a $5,000,000 exemption ($10,000,000 for married couples). This insidious tax, often called the "Death Tax" is the most unfair and unjust tax on the books. It taxes people on wealth that they accumulated through their lifetime and on money they paid tax money on already. The Heritage Foundation erected and great article on the Estate Tax and its implications called The Economic Case Against the Death Tax. etsta tax money will improve again in 2013.
Stable Investment Taxes

The capital gains tax rate will be able to remain 0% for earners in the 15% money tax bracket or lower. Capital gains taxs on a large amount of earners remains 15%. Income from dividends is taxed at capital gains rates.

Tax Credits:

* Child Tax Credit
The child tax credit was going to fall off from $1,000 per child to $500; however, that ebb is delayed until 2013. The credit is still refundable for certain filers.

* Payroll Tax Credit (Making Work Pay)
The partial credit of 6.2% for payroll taxes the low income earners pay is eliminated. This will be able to substantiate the tax liability of low-income single payers by $400, and joint filers by $800. The payroll tax cut mentioned above will take the place of the current credit.

* Earned Income Tax Credit (EITC)
The economic stimulus act provided for a 45% increase of the EITC credit for consumers with three or more children, and higher tax limits for qualifying for the credit. This provision is extended for 2011 and 2012. It is set to expire in 2013.

* College Tuition Tax Credit
The region stimulus act (“American Recovery and Reinvestment Act of 2009”) tax credit is renewed and now expires in 2013.
  
* Energy Savings Credit
The 2011 charge of 30% (up to $1,500) for electricity efficiency improvements to principal residences expires. In its place is a 10% credit (up to $500). There are funny things limitations specific items the as furnaces, water heaters, and windows.

College Savings Plans:
With the expiration of the Bush tax cuts, in 2011, 529 Plans can no longer be used to pay for a computer or broadband access.

Section 179 Expenses:
One of the main tax breaks for small businesses is the Section 179 expense deduction. Currently $250,000, it increases to $500,000 in 2011. This will allow businesses to expense a much larger amount of equipment and avoid needing to depreciate this expenses during many years, causing the tax bill to be much lower in the nearer term. Please visit Section179.org for more information. The section 179 limit would return to $125,000 in 2012.

Bonus Depreciation:
For 2011 only, bonus depreciation is increased to 100% for purchases of certain qualifying property. Bonus depreciation will be able to provide to 50% in 2012.
1099 Reporting Requirements

Starting in 2011, any arena the current does a larger number of than $600 in business with any vendor serves to be pivotal to find a 1099 form. This massive increase in paperwork are able to increase in value the rates of every small and large business and will likely increase prices on the goods and services the these companies provide. For example, if a business purchases a $1,000 computer from Amazon, too business will be required to file a 1099 with the IRS, something not previously pivotal for vendors organized as corporations. For a good amount of information see Big Changes to IRS Form 1099 in 2011 at the Investing Blog.
Mortgage Insurance Premiums

As of January 1, 2012, taxpayers will no longer be allowed to deduct funding insurance premiums from their tax returns. In 2010, homeowners constructing less than $100,000 who got paying insurance premiums on mortgages substantiated following December 31, 2006 got able to take this deduction. This provision was set to expire in 2011, but the temporary tax cut law extended it to 2013.
Student Loan Interest Deduction

The Student Loan Interest Deduction has been extended for two further years. Starting in 2013, income limits for individuals or married couples drop and taxpayers can only deduct interest on the previous 5 years of this student loans.

Medicine Cabinet Taxes:
The recent Healthcare law imposes a new rule in 2011 that Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs) and Flexible Spending Accounts (FSAs) cannot be used up for non-prescription medicine. This is in effect a tax increase on any individual with the an account. Also, an annual tax on kind and cr pharmaceutical manufactures will increase the cost of type and cr drugs (even though this tax isn't paid directly by individuals).
Tanning Tax (a.k.a "The Snooki Tax")

The Tanning Tax of 10% that just commenced in July keeps on then year.

Despite the length of such list of tax changes, there are many other less significant fluctuations on the horizon. Always consult an accountant or tax professional regarding your specific circumstances.
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1 comment:

  1. you say "The Tanning Tax of 10% that just commenced in July keeps on then year." what is tanning tax result

    ReplyDelete

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