Many claim that 2011 brought us the greatest tax hike in the history. Taking a closer look ourselves, we can surely check how true that is. So, let’s begin.
It is obvious that the rates for income taxes in each bracket are going up. The 10 percent bracket has been discarded. High-income tax payers will feel the sting of the 39.6 percent bracket. Also, the marriage tax penalty, where married couples pay more than they would if each person filed a single return, has been re-incorporated.
If you itemize your deductions, the amount you can deduct will be phased out above $169,750. The reduction in the value of the itemized deduction can be up to 80 percent. There is 55 percent estate tax on assets returns, with a $1,000,000 exemption. This means, heirs pay taxes on their inherited property too. The capital gains tax rate will jump from 15 to 20 percent for most taxpayers.
Wondering about the income tax credits?
- Well, the child tax credit drops from $1,000 per child to $500. Also, the credit is no longer refundable unless earners make less than $12,550. For joint filers, the tax credit begins to phase out at $110,000, and phases out at $75,000 for single filers. This will seriously impact low-income families.
- The partial credit (payroll tax credit) of 6.2 percent for payroll taxes that low income earners used to pay is eliminated. This will increase the tax liability of low-income single payers by $400 and joint filers by $800.
- The 2010 credit of 30 percent (up to $1,500) for energy efficiency improvements to principal residences expires.
Apart from the above alterations, there has been some other changes too such as in capital gains tax, Earned Income Tax Credit (EITC), college tuition tax credit, mortgage insurance premiums, student loan interest deduction, medicine cabinet taxes etc. for more detailed information you can easily refer to any tax forums or follow tax blogs so you’re prepared.