New Taxes for 2011 – How Much is Accurate?

[Bryan Hancock]

Someone sent me this email so I wanted to post it less as much of the political spin as I could subtract as possible to get a sense for how much of it is accurate. Here are taxes that will be coming for 2011 according to the email:

“Wave Oneâ€

1. 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

2. 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 rates in between will also rise. Itemized deductions and personal exemptions 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%

3. 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

4. The return of the 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

5. 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

“Wave Twoâ€
6. The “Medicine Cabinet Tax†– 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)

7. The HSA (Health Savings Account) 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

“Wave Threeâ€

8. The Alternative Minimum Tax (AMT) 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 won't be held harmless, and many tax relief provisions will have expired. The AMT will ensnare over 28 million families, up from 4 million last year. According to the 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

9. 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 currently expense half of their purchases of equipment. In January of 2011, all of it will have to be "depreciated"

10. 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

11. 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
- Coverdell 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

12. 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

13. Insurance will be INCOME on your W2's - Starting in 2011, 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. You will be required to pay taxes on a large sum of money that you have never seen. On page 25 of 29: TITLE IX REVENUE PROVISIONS - SUBTITLE A: REVENUE OFFSET 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."