In a recent tax planning meeting with one of our clients, we shocked
them with what their income tax future looked like for 2013 if -- on
the off-chance -- Congress continues to do nothing to provide a
long-term permanent set of tax laws. [Full]
They had no
idea what tax breaks were expiring this year and next year, and how
much it would cost them personally in extra income tax. But they aren't
alone, many Americans and even tax professionals aren't aware that
their tax bill could rise dramatically next year. [...]
Major Individual Income Tax Benefits Expiring
12/31/2011:
• Personal tax credits applied against income tax no
longer apply
• Higher alternative minimum tax exemptions revert back
to extraordinarily-low thresholds
• $250 school teacher expense deduction ends
• Mortgage insurance premium deduction expires
• State and local sales tax deductions expire
• Tuition and related fees deduction end
• IRA to charity tax-free transfers stop
• 2% Social Security tax reduction ends
Major Individual Income Tax Benefits Expiring
12/31/2012:
• Marriage penalty equalization ends
• Dividends taxed at capital gains rates removed, taxed
at regular rates now
• Capital gains low tax rates expires
• Removal of itemized deduction phase out for higher
income Americans
• Removal of personal exemption phase out for higher
income Americans
• Child care deduction limit of $3,000 reverts to $2,400
• Child credit reduces from $1,000 per child to $500 per
child
• Low 10% tax bracket for low income Americans is
eliminated
• Lower income tax rates and smaller brackets expires
• Refundable adoption credit and reduced deduction
• American Opportunity college education credit expires
• Major reduction in earned income credits and refunds
• Income tax exemption for debt forgiven on home
foreclosures and repossessions
• Deduction for student loan interest ends
• Education IRA limit drops from $2,000 to $500
In
summary, because of tax laws expiring this year and next, we estimate
that the Smiths will owe $3,598 more in income tax in 2013 than in 2011
with no change in their income. |
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