Posted by: Debby Durkee | July 7, 2010

Prepare for 2011 tax increases.

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Prepare for 2011 tax increases.

From the expiration of the Bush tax cuts to the 20 new taxes in Obamacare to the Alternative Minimum Tax that will hit over 28 million taxpayers in 2011 (up from 4 million last year), Americans need to become aware of how much their taxes will go up in 2011. It’s not going to be pretty, and all of this will be happening during what is beginning to look like a double dip recession, or dare I say it…a depression.  This is from Ryan Ellis of Americans for Tax Reform.

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

Snip –
Personal income tax rates will rise.  …  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 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

After 2010 is the time to start gifting your children their inheritance because if you die after that, they could lose more than half of their inheritance.

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 millionA person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Those of us who have been saving and investing for our retirement will be screwed as the stock market not only falls but if you realize a gain or a dividend on your earnings the federal government doesn’t like that too much. They want a slice of your pie.

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).

One has to wonder if this is a slap to Sarah Palin. Truly this seems especially cruel.

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 United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C….can easily exceed $14,000 per year.  Under (current) tax rules, FSA dollars can be used to pay for this type of special needs education.  Snip —

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

Snip —

The AMT will ensnare over 28 million families, up from 4 million last year.  …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.  Snip —

Taxes will be raised on all types of businesses.  …  The biggest is the loss of the “research and experimentation tax credit,” but there are many, many othersCombining 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…  Employer-provided educational assistance is curtailedThe student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed.  Snip —

Read it all and weep here: http://www.atr.org/sixmonths.html?content=5171

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