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Tax Cuts Set to Expire 12/31/10
The following taxes will increase January 1, 2011:
The marginal income tax rates will increase as follows:
--35% bracket will increase to 39.6%
--33% bracket will increase to 36%
--28% bracket will increase to 31%
--25% bracket will increase to 28%
--10% and 15% brackets will condense to 15%
Dividends will no longer be taxed at the capital gains rate for individuals, thereby increasing the double taxation of dividends by as much as 164%.
The personal capital gains tax will increase to 20% and 10% (from 15% and 5%).
The child tax credit will decrease from $1,000 to $500.
The standard deduction for couples as a percentage of the standard deduction for singles will decrease from 200% to 167%--restoring the marriage penalty.
The top end of the 15% marginal income tax bracket for couples as a percentage of the top end for singles will decrease from 200% to 167%--restoring the marriage penalty.
The “death” tax using the “stepped up” basis will return with a 55% maximum rate (including surtax) and a $1 million exemption, after years of decreasing “death” tax rates, increasing exemptions, one year using the “carryover” basis to calculate the tax due, and one year of total elimination (2010).
The Section 179 business expensing cap will decrease from $250,000 to $125,000 (plus inflation after 2008), and the starting point for the phase-out of this deduction will decrease from $800,000 to $500,000.
The dependent care tax credit will decrease from $3,000 to $2,400.
The American Opportunity Tax Credit will expire.
No longer will individuals be able to receive a credit to purchase energy efficient home appliances.
The tax credit to hire unemployed veterans and disconnected youth will expire.
The Work Opportunity Tax Credit, which allows employers to credit up to 40% of the first-year wages of a new employee, will expire.
The $400 “Making Work Pay” Tax Credit will expire.