Hedge-fund managers and affluent taxpayers mostly do well, but couples earning less than $40,000 may pay more taxes.
House passage of a bipartisan tax bill resolves many urgent questions weighing on individuals and businesses -- but also creates vast groups of winners and losers among them.
Because the deal left in place many tax rates that otherwise could have jumped significantly, and lowers the payroll tax for all workers by two percentage points, most individual taxpayers should come out ahead, say tax experts.
Yet some bond investors, for example, could be left poorer. Concerns over the deal's long-term fiscal effects have prompted big selloffs in U.S. Treasury securities since the deal was announced on Dec. 6. Moody's Investors Service warned on Monday that the tax deal raises the chance that it would issue a negative outlook on the U.S. government's AAA credit rating.
"It's easy to have lots of winners when you're giving up this much revenue," said Michael Graetz, a former Treasury official who is now a professor at Columbia University Law School. "But we can't finance the government by borrowing forever."
The package extends many Bush-era tax breaks, including lower rates, and cuts the Social Security payroll tax from 6.2% to 4.2%.
This post is from the Associated Press.
Here are the highlights of the tax package passed by Congress late Thursday and sent to President Barack Obama. It would cost about $858 billion; most provisions, which were to expire Jan. 1, would be extended for two years, unless noted.
The package extends:
- Lower rates for taxpayers at every income level. The top rate, on taxable income above $379,150, would stay at 35%, instead of increasing to 39.6%. The bottom rate, on taxable income below $8,500 for individuals and $17,000 for married couples, would stay at 10%, instead of increasing to 15%. Cost: $186.8 billion.
Taxpayers who didn't have enough withheld because of the Making Work Pay credit will have to pay up when they file.
This post is by Stephen Ohlemacher of the Associated Press.
About 13.4 million taxpayers may be getting unexpected tax bills because they were awarded too much money under President Barack Obama's Making Work Pay tax credit, a government audit said Thursday.
The tax credit, which expires Jan. 1, was designed to increase take-home pay by about $8 a week through new tax withholding tables. The credit was capped at $400 for individuals and $800 for married couples filing jointly.
However, the credit put millions of taxpayers at risk for not having enough taxes withheld from their paychecks, resulting in a tax bill when they file their returns, said the audit by J. Russell George, the Treasury inspector general for tax administration.
Tax deal lets homeowners continue to deduct PMI, but some will lose the right to deduct property taxes.
It's no secret that homeowners get special tax treatment under the U.S. tax code.
There are the biggies of being able to deduct mortgage interest and property taxes. In case you missed them, those tax breaks are the latest (numbers 33 and 34) in the running Weekly Tax Tips for 2010 feature at Don’t Mess With Taxes.
In recent years, Congress even enhanced homeownership tax benefits a bit.
Provisions on Coverdell accounts, capital gains, IRA gifts to charity and other extensions benefit those who are not rich.
In December, President Obama and congressional Republicans reached a deal to preserve tax breaks created in the Bush adminstration. But the agreement isn’t all about tax cuts for the rich and unemployment bennies for the unfortunate. There are some sweet provisions in there for the vast middle, too. Dig deeper than the headline-grabbing rates (.PDF download), and you’ll find provisions that can help savers and investors, as long as they know how to make the most of them.
You’ve probably seen the big-picture provisions already (find them all in this Reuters factbox).
Current plan would exempt 40,000 estates from tax next year. Democrats say that gives too much to the wealthy.
This post is by Stephen Ohlemacher of the Associated Press.
More than 40,000 estates worth $1 million to $10 million would be expected to escape inheritance taxes next year under the deal struck by Republicans and President Barack Obama.
The package would leave only about 3,500 of the largest estates subject to federal taxes next year, a boon for the wealthy that many House Democrats say they can't accept.
The estate tax has emerged as one of the biggest obstacles to bringing Democrats aboard the tax cuts-employment benefits package negotiated by Obama and GOP leaders in Congress. House Speaker Nancy Pelosi called the lower estate tax "a bridge too far," while others in her caucus said it was a giveaway to the rich that would do little to create jobs.
You may want to buy office equipment, set up a retirement plan or pay next year's health insurance premiums before Dec. 31.
This post is by Mary Beth Franklin, senior editor of Kiplinger's Personal Finance.
Whether you launched a new business this year or you’re an experienced entrepreneur, being your own boss comes with a whole new set of tax issues -- and plenty of opportunities to trim your tax bill. In most cases, you have to spend money before the end of the year to claim a deduction on your 2010 tax return. And the tax breaks apply whether you are a full-time business owner or operate a sideline enterprise.
Upgrade your office. You may deduct the cost of equipment you buy for your business before year-end, such as a computer, software, shredder, filing cabinets and furniture. And you have two ways to claim a deduction: all at once (known as first-year expensing), or gradually over the life of the property, as fixed by law, by claiming depreciation deductions.
Small businesses, including sole proprietorships, are permitted to expense up to $500,000 of new business equipment, computers and furniture purchased in 2010, twice the 2009 limit. So if you purchased a new computer for $2,500 in 2010, you could deduct the full $2,500 on your 2010 tax return.
After weeks of Washington back-and-forth, President Obama and GOP leaders have reached an uneasy agreement. But will what helps families now hurt them later?
This post comes from MSN Money's Liz Pulliam Weston.
I'm feeling some tax-cut whiplash.
A couple of weeks ago, my husband and I were contemplating a tax bill that would rise at least $6,500 next year if the Bush-era tax cuts expired or weren't extended for households, including ours, that make over $250,000.
Today, we stand to benefit from a deal that not only preserves our current tax breaks, but also gives us an additional $4,200 tax cut -- a giveback much bigger than that enjoyed by the vast majority of workers.
What the hell?
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