News from Saginaw County Republicans

Whether you're married, a parent, a senior, a business owner or just any taxpayer, your taxes will be rising on January 1, 2011. This is due to the scheduled expiration of tax cuts that were passed when George Bush became President. Tax cuts that the current Democrat-controlled Congress appears to have no interest in extending.

So, how does $1,100 to $2,100 more a year in taxes sound to you? How will that affect your family's budget? The total increase is about $3.8 trillion in tax increases, affecting every American who pays income taxes. Congressman Dave Camp has some great details on just what increases you will see on his website. Just click to see how much you'll be paying next year.

Joan Pryde, senior tax editor for The Kiplinger Letters, lists these details for the Bush tax cuts that expire on January 1, 2011:
The top personal income tax rate will rise from 35 to 39.6 percent (this is also the rate at which 2/3 of small business profits are taxed). Even the lowest rate will rise from 10 to 15 percent., and all 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.

There will be higher taxes on marriage and family. The "marriage penalty" (narrower tax brackets for married couples) will return. 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. And the dependent care and adoption tax credits will be cut.

The Death Tax will return for those dying on or after January 1, 2011,. There will be a 55 percent top rate on estates over $1 million. A person leaving behind a good home and a retirement account could easily pass along a death tax bill to their loved ones. There will also be higher tax rates on savers and investors because the capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will also rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.

These tax hikes do not include the over twenty new or higher taxes due to Obamacare. But several will go into effect on January 1, 2011. If you have a Health Savings Account (HSA), Flexible sSending Account (FSA), or Health Reimbursement (HRA), you will no longer be able to use pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

Parents of special needs children will also be hit by a provision of Obamacare imposes a cap on Flexible Spending Accounts (of $2500 (Currently, there is no federal government limit). Many families currently use FSAs to pay for special needs education, and this tuition can run as high as $14,000 per year. Under the new tax rules, FSA dollars can not be used to pay for this type of special needs education.

Withdrawals from Health Savings Accounts will now be taxed at 20 percent instead of the current 20 percent, disadvantaging them relative to IRA's and other tax-advantaged accounts, which remain at 10 percent.

The nastiest surprise of all may be the Alternative Minimum Tax (AMT). The AMT won't be held harmless, and many tax relief provisions will have expired. Thus, 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.

Also, taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place, with the largest being the loss of immediate expensing of large purchases.

Finally, your health insurance is now INCOME on your W2's, and you will be taxed on its value. As with most of these increases, the media never mentioned thiat starting in 2011, 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. Even if you're retired your gross will go up by the amount of insurance you get. For many, it also puts you into a new higher bracket so it's even worse.