As we’ve seen, the estate tax expiration had an impact of the families of a number of people who passed this year. But this was a one year deal, next year if congress doesn’t fix this, the tax comes back to levels not seen in nearly a decade.
That’s not all. When Bush was in office, income tax rates were cut under two bills, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and the Jobs and Growth Tax Relief Reconciliation Act of 2003. Before EGTRRA, and back in 2011, will be a lowest rate of 15%, no 10% bracket. To summarize, our current rates include six tax brackets; 10%, 15%, 25%, 28%, 33% and 35% as income rises. If no extension or new tax rates are passed into law you will see a return to 15%, 28%, 31%, 36% and 39.6%. This doesn’t look too bad, but I thought President Obama promised not to raise rates on those making less than $250K. This looks like the lowest earners will see arise, doesn’t it?
The child care credit is also due to expire. This credit was raised to $1000 per child, but is due to drop back to $500. This credit phases out for a couple making over $110K or a single person over $75K. Well below that $250K, Mr President.
Next, the Capital Gain Rates, today the long term (over 1 year holding period) gains as well as qualified dividends are taxed at 15% maximum. In 2011, the cap gain rate is 20% and dividends taxed as ordinary income. Ouch.
The countdown starts, just over 4 months to go to fix the potential train wreck 2011 will bring.