By at August 25, 2010 | 1:30 am | Print

2011 TAXES

In just six months, the largest tax hikes in the history of America will take effect.  They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors,
 small business owners, and families.

These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from
 35 to 39.6 percent (this is also the rate at which two-thirds of small
 business profits are taxed).  The lowest rate will rise from 10 to 15
 percent.  All the rates in between will also rise.  Itemized deductions and
 personal exemption s will again phase out, which has the same mathematical
 effect as higher marginal tax rates.  The full list of marginal rate hikes
 is below:

The 10% bracket rises to an expanded 15%

The 25% bracket rises to 28%

The 28% bracket rises to 31%

The 33% bracket rises to 36%

The 35% bracket rises to 39.6%

Higher taxes on marriage and family

The “marriage penalty” (narrower tax
 brackets for married couples) will return from the first dollar of
 income.  The child tax credit will be cut in half from $1000 to $500 per
 child. The standard deduction will no longer be doubled for married couples
 relative to the single level.  The dependent care and adoption tax credits
 will be cut.

The return of the Death Tax. This year, there is no death tax.  For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise
 from 15 percent this year to 20 percent in 2011.  The dividends tax will
 rise from 15 percent this year to 39.6 percent in 2011.  These rates will
 rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare.  Several will first
 go into effect on January 1, 2011.  They include:
 The “Medicine Cabinet Tax”  Thanks to Obamacare, Americans will no longer be
 able to use health savings account (HSA), flexible spending account (FSA),
 or health reimbursement (HRA) pre-tax dollars to purchase non-prescription,
 over-the-counter medicines (except insulin).

The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on
 flexible spending accounts (FSAs) of $2500 (Currently, there is no federal
 government limit).  There is one group of FSA owners for whom this new cap
 will be particularly cruel and onerous: parents of special needs children.
 There are thousands of families with special needs children in the United
 States, and many of them use FSAs to pay for special needs education.
 Tuition rates at one leading school that teaches special needs children in
 Washington , D.C. ( National Child Research Center ) can easily exceed $14,000
 per year.  Under tax rules, FSA dollars can be used to pay for this type of
 special needs education.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the
 additional tax on non-medical early withdrawals from an HSA from 10 to 20
 percent, disadvantaging them relative to IRAs and other tax-advantaged
 accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll
be in for a nasty surprise-the AMT – (Alternative Minimum Tax) won’t be held harmless,  many
 tax relief provisions will have expired.  The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year.
 According to the left-leaning Tax Policy Center , Congress’ failure to index
the AMT will lead to an explosion of AMT taxpaying families-rising from 4
 million last year to 28.5 million.  These families will have to calculate
 their tax burdens twice, and pay taxes at the higher level.  The AMT was
created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.

Small businesses can normally expense (rather than slowly-deduct, or
 ”depreciate”) equipment purchases up to $250,000.  This will be cut all the
 way down to $25,000.  Larger businesses can expense half of their purchases
of equipment.  In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores
 of tax hikes on business that will take place.  The biggest is the loss of
 the “research and experimentation tax credit,” but there are many, many
 others.  Combining high marginal tax rates with the loss of this tax relief
 will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition
 and fees will not be available.  Tax credits for education will be limited.
 Teachers will no longer be able to deduct classroom expenses.&n bsp; Covered
 Education Savings Accounts will be cut.  Employer-provided educational
 assistance is curtailed.  The student loan interest deduction will be
 disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a
 retired person with an IRA can contribute up to $100,000 per year directly
 to a charity from their IRA.  This contribution also counts toward an annual
 ”required minimum distribution.”  This ability will no longer be there.

Now your insurance is INCOME on your W2′s…One of the surprises we’ll find come next year, is what follows – – a little
 ”surprise” that 99% of us had no idea was included in the  “new and
 improved” healthcare legislation . . . the dupes, er, dopes, who backed this
 administration will be astonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer
 will be increased to show the value of whatever health insurance you are
 given by the company. It does not matter if that’s a private concern or
 governmental body of some sort.  If you’re retired?  So what; your gross
will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have
 never seen.  Take your tax form you just finished and see what $15,000 or
 $20,000 additional gross does to your tax debt.  That’s what you’ll pay next
 year.  For many, it also puts you into a new higher bracket so it’s even

This is how the government is going to buy insurance for the 15% that don’t
 have insurance and it’s only part of the tax increases.

Not believing this???  Here is a research of the summaries…..

 PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002  “requires
 employers to include in the W-2 form of each employee the aggregate cost of
 applicable employer sponsored group health coverage that is excludable from
 the employees gross income.”

Joan Pryde is the senior tax editor for the Kiplinger letters.  Go to
 Kiplingers and read about 13 tax changes that could affect you.  Number 3 is
 what is above.

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  1. coastcontact, 4 years ago

    MB Snow
    I realize that you are a conservative. However, just to make this blog more interesting you ought to open up to at least one moderate or liberal. Make this blog a place for discussion of issues rather than just one side.

  2. London Calling, 4 years ago

    This is not a conservative article, this is a Democrat produced article, this is their law. Why, when the left has control of most media, is a conservative site required to voice their opinion? They don’t voice ours on their sites. The left is like Islam, they want tolerance, but refuse to give it.

  3. Kenneth Chemin, 4 years ago

    Obama and his people is going to rune this country, we are well on the way to loosing our way.

  4. coastcontact, 4 years ago

    To London Calling: A blog that offers just one point of view brings little discussion. It just sings the same song to “ditto heads.” Discussion and debate is what makes America a success. Ms. Snow ought to open this blog to opposing views. As a moderate I am very concerned about the tax structure going into effect January 1. However, if there is no discussion the elected representatives will make the decisions without public input.

  5. coastcontact, 4 years ago

    from Urban Legends:

    Analysis: False and misleading. While the Patient Protection and Affordable Care Act (H.R. 3590) does require employers to include the aggregate cost of applicable employer-sponsored group health coverage on employees’ W-2 tax forms beginning in 2011 (see text of bill, page 735), it does not require employees to pay income tax on that amount. Note that the quoted excerpt from the Congressional Research Service summary of the bill describes the cost as “excludable from the employee’s gross income.”

    Interestingly enough, the Kiplinger article referenced in the message reaches the same conclusion — “The amount reported is not considered taxable income” — though for some odd reason that isn’t mentioned in the email.

    However, as the Kiplinger article further points out, the Patient Protection and Affordable Care Act contains other changes to the federal tax code that will result in some people’s taxes increasing over the next few years. I recommend reading it for a concise, accurate overview of how health care reform will (and won’t) impact your personal taxes: “Health Care Reform: 13 Tax Changes on the Way.”

    According to a report by PolitiFact.com, the real reason employers will now be required to list the cost of group insurance on employees’ tax forms is that beginning in 2014 it will be the IRS’s job to verify whether individuals and their dependents have health care coverage as mandated by the legislation. Again, you will not pay personal income tax on that amount.

  6. Thx4NothingRepugnuts, 4 years ago

    We all hate taxes but lets get real. Interesting but misleading article – It fails to mention that if the Repugnuts would stop holding up the Obama’s/Dems legislation which would extend the Bush tax cuts for 98% of the U.S. population including middle and lower wage earners thus making much of the above post pure bunk.

    The only taxes that would expire would be taxes on the last tens of thousands of those making $250,000 or more which unfortunately is only 2% of the U.S. Population. If more of us made $250,000 or more the increase on these upper earners would take a bigger bite out of our deficit.

    The first tens of thousands of those making $250,000 would be taxed just like the other 98% of us at the existing lower rates.

    Most people do not begrudge those making $250,000 or more annually but it is hard to feel sorry for them either when the majority of the country’s families are existing on less than half that.

    Besides, the increase can’t be too bad as the increase just throws taxes for those earning $250,000 or more back to Clinton era levels when the economy was doing gang busters.

  7. coastcontact, 4 years ago

    Thx4NothingRepugnuts has offered an excellent analysis. The extremes in wealth are more obvious in a large city like Los Angeles, NYC, Boston, and Dallas. The wealthy are not just a little bit better off. Many are extremely wealthier than the average American. According to the U.S, Census bureau the Median family income in 2008 was $52,029. The Arithmetic Median is defined as the middle value.

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