Impending Tax Increases

From the latest update from the Republican Study Committee:

Unless Congress takes action, the following tax increases* will automatically occur at the beginning of the following years:

In 2007:

 The exemption for the Alternative Minimum Tax (AMT) will decrease from $42,500 to $33,750 for single filers and from $62,550 to $45,000 for married couples filing jointly.

(Technically, this tax increase above has already occurred; however, since most tax returns for 2007 are not filed until the winter or spring of 2008, this increase can still be reversed without most taxpayers being affected by it.)

In 2008:

 Taxpayers in states with no state income tax will not be allowed to deduct their sales taxes from their federal income tax.

In 2010:

 The section 179 small business expensing cap will decrease from $100,000 to $25,000, and the definition of a small business will decrease from $400,000 to $200,000.

In 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% bracket will increase to 15%

 The lowest marginal income tax bracket will contract from covering the first $7,000 of income for singles and $14,000 for joint filers to covering only the first $6,000 of income for singles and $12,000 for joint filers.

 The personal capital gains rate will increase from 15% and 0% to 20% and 10%.

 Dividends will no longer be taxed at the personal capital gains rates, thereby increasing the double taxation of dividends by as much as 62%.

 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 child tax credit will decrease from $1,000 to $500.

 The estate tax using the “stepped up” basis will return with a 60% maximum rate (including surtax) and a $1 million exemption, after years of decreasing estate tax rates, increasing exemptions, and one year using the “carryover” basis to calculate the tax due.



*This list is not exhaustive.

Sources for the above information: Joint Committee on Taxation and Americans for Tax Reform.