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Saturday, September 18, 2010


If the expiration of the 2001 tax breaks are allowed to proceed as planned, 2011 will see the highest tax hike in U.S. history. Discussion is heating up regarding extending some or all of the existing breaks, so perhaps not all of the changes will arrive in 2011. Below is a table of many of the looming changes:



10% income tax rate disappears
amount of income covered by 15% income tax rate shrinks
top 25%,  28%, 33% & 35% income tax rates convert to 28%, 31%, 36%, and 39.6% rates
45% estate tax top rate (although there is no estate tax in 2010) increases to 55%, with 5% surtax to phase out graduated rates for the highest estates
estate tax unified credit exemption equivalent (was $3.5 million in 2009) reduced to $1 million
15% capital gains rate increased to 20% (18% for assets held at least 5 years)
15% qualified dividend income tax rate eliminated – increased to ordinary income rates
income exclusion for employer provided education assistance eliminated
above-the-line student interest income tax deduction reduced
household and dependent care income tax credits reduced
ability of heirs and estates to use Section 121 home sale exclusion of decedent eliminated
backup withholding rates on various types of income raised
reduction in itemized deductions for higher income taxpayers applies once again
phase-out of personal exemptions for higher income taxpayers applies once again
15% accumulated earnings and personal holding company tax rates increased to 39.6%
generation skipping tax reinstated, with a $1 million exclusion amount and a 55% rate
transfers at death to nonresident aliens appreciation in property subject to income tax
35% maximum gift tax rate increased to 55%

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