By the start of 2010, President Obama proposed a number of tax changes for 2011. It was until the end of that year that eleventh hour tax changes were approved and signed into the law. While many of us are well aware of the latest celebrity break ups and hook-ups, only a few seem to know about these tax changes.
It pays to known about tax rates and any changes made regarding these taxes. It gives you a better idea of what you are going pay and how much you can save. Believe it or not, knowing about the tax rates and changes can greatly help in efficient financial planning.
In the 2011 bill, a few changes are made, a few things remain unchanged and a few temporary ones will expire in 2012. For better or for worse, these changes will affect individuals and businesses in one way or another. Let’s take a look at what these changes are.
- The lowest bracket remains 10%, this is a temporary extension till 2012. Otherwise it would have gone up to 15%. 25%, 28%, 33% and 35 % tax bracket for individuals is also temporarily extended. The current law related to these tax brackets was going to expire in 2011. If it wasn’t extended the current brackets would have gone up to 28%, 31%, 36% and 39% respectively.
- Standard deduction rates remain largely the same. For a single taxpayer, the amount of deductions is $ 5,800. For married couple filing jointly, it is $11,600. Senior citizens will get an additional standard deduction of $ 1,150.
- The personal exemption amount for last year was $3,650 and this year it is raised to $3,700.
- Extensions are also made on deduction of state and local sales tax and deduction of private mortgage insurance premiums. Through 2011, state and local sales tax can be deducted instead of state and local income tax. Mortgage insurance premiums will also continue to be deducted by homeowners.
- The Alternate Minimum Tax exemption for 2011 is $48,450 for single tax payers and $74,450 for those filling jointly. Married couple filing separately will have to pay $37,225.
- 2011 tax changes also include a temporary repeal on Personal Exemption phase-out. This will be a good news for high-income tax payers. Personal exemptions of high-income tax payer will be reduced to adjusted gross income increases.
- Pease limitations are also temporarily repealed. According to Pease provisions, itemized deduction is reduced by 3% at the top of the brackets for high-income tax payers.
- Capital gains and dividends will also remain low through out the year.
- Under the temporary tax cut on Employee payroll tax, the percentage is reduced to 4.2% from 6.2 in 2010. The rate for self employed individuals is reduced from 12.4% to 10.4%.
- For teachers a $250 deduction is also introduced as a deduction for states sales taxes in lieu of state income tax deductions.
- TurboTax Presents Overlooked Tax Deductions (2010tax.org)
- Parents Can Claim Benefits On Their 2010 Tax Return (goarticles.com)