Maco & Associates
News You Can Use
October 2009

In This Issue
Child Tax Credit Reduction
Estate Tax: Death Tax
Capital Gains Tax Changes
Quick Links
Toys for Tots:
A Convenient Drop-Off Location for All!
Spring Greetings!
We are delighted to support Kalejta Financial Management in the 2009 Toys for Tots Foundation Campaign. Their office, located at 740 W. Main St., Suite 1, Trappe, PA 19426, is an official Toys for Tots Drop-Off Location. We will be moving to the same location, Suite 3, at the end of the month. Pop in and visit us in our new location, and if you are so inclined, drop off a new toy in Suite 1 and meet our new landlord - Thomas Kalejta, and his wonderful staff!
Expiring Tax Credits That May Affect You
Greetings!

Here's the latest edition of Maco & Associates' newsletter, News You Can Use, which brings tax issues to your attention. Today, we're calling out the possible expiration of Bush-era tax cuts in 2010.

In 2001, the Bush Administration issued tax cuts for all tax paying Americans that reduced rates on income, capital gains, and dividends.  These cuts are set to expire in 2010 and tax payers may be surprised to lose the benefits of these cuts.Tax Increase If these credits are allowed to expire, the lowest tax bracket would jump from 10% to 15% income tax, which equates to a 50% tax increase in taxes for the lowest levels. For those in the highest tax bracket, rates would increase from 35% to 39% income tax -- an increase of slightly more than 10%.
 
Congress may choose to extend or make these cuts permanent, but without an increase in income taxes, it would be impossible to support the planned health care reforms that have garnered so much attention lately. There is little doubt these cuts will be allowed to expire. It's estimated that the tax cuts are costing the government $1 to $2 trillion, which is the cost of planned health care reforms.

What does it all mean?

In general, if these tax reductions expire, everyone will be affected. The decision has yet to be made whether these tax cuts will be renewed or expire as planned. 2010 will be a year of major uncertainty. Please consult with us and your financial planner/estate planner throughout the year to ensure that you are minimizing your tax liabilities!
Child Tax Credit Reduction
Child Tax Credit
 The 2001 tax cut increased the child
 tax credit to $1,000, which was a
 refundable amount so it was available
 to those who did not even have a tax
 liablility. In 2010, the child tax credit
 will be reduced to a maximum of
 $500 per child. 
Estate Tax: Return of the "Death Tax"
Death TaxThis tax is placed on large inheritances and estates that are inherited after a death. This tax would only affect estates that are valued over $1 million, but this could include family businesses, properties, or farms. Over the past years, the Estate Tax exemption has gradually increased as the tax level decreased. In 2010, the entire tax levy disappears; when the tax cuts expire at the end of 2010, the taxes come back in full force on estates over $1 million at a tax rate of 55%. If you are affected by this change, talk to your financial advisor. If you don't have one, we can provide recommendations for you.
Capital Gains Tax
With the expiration of the current tax credit, the capital gains tax will increase from 8% to 10% for those in the lowest tax bracket. Even worse, all others will have a tax of 20% on all capital gains! 
As always, we're here to help you make sense of the numbers and to help you plan for unexpected tax changes. Give us a call  at 610-489-7215 or send us an email any time throughout the year. We look forward to hearing from you.
 
- Maco & Associates