Taxes And The Proposed Tax Rates

The President Plans to Double Tax Rates for the Wealthy

President Obama is planning to tax income from capital gains as ordinary income. This will increase the top tax rate to 39.6 percent. These changes are meant to raise taxes of up to 1.4 trillion from top earners over the next decade.

Couples earning more than 200,000 annually will be required to treat income from dividends as ordinary income. According to the president, this would raise 206.4 billion dollars over the next decade.

According to Gene Sperling, the country cannot afford to lose 206.4 billion dollars on its revenue budget  by offering lower tax rates and tax cuts to top earners.

The president plans to increase the top tax rate to 39.6 percent by next year from the prevailing top rate of 35 percent. Capital gains would be taxed at a top rate of 20 percent from the prevailing 15 percent.

As part of his healthcare law, the president plans to increase the unearned income tax rate by 3.8 percent for couples earning at least 200,000 annually. Experts predict that in the next financial year, some taxpayers will have to pay federal taxes amounting to 43.4 percent on their dividends. This is almost an increase of 300 percent of what they are currently paying.

Pre-2003 Taxation

These proposals would return tax rates to pre-2003 levels. Proponents of these changes claim that it will promote a more efficient and just allocation of capital.

Generally, the president intends to reduce tax deficit on 2012 taxes by taxing the wealthy.

President Obama recently stated in a speech that the government does not need to continue offering tax cuts to individuals who are already doing very well.

There are many other changes in the tax codes that the Obama Administration is proposing.

Tax Tips For Those Selling Their Homes

If you sell your house there are certain benefits that you may get from the Internal Revenue Service (IRS). Here are a few tax tips for consultants and you on how to benefit.

If you have used the home for two out of the last five years, you can exclude 250,000 dollars from your income, the capital gain is tax free. But you may not exclude the gain if you already did so on another house in the last 5 years.

You must report all gains that cannot be excluded under the $250,000 limit. And if there is a loss on the sale of the home, you cannot deduct it. Sorry.

There are worksheets that help you determine whether you made a gain or loss on the sale. These can be found in IRS publication 523, on the IRS.gov website.

Having more than one house limits you to excluding gains from the sale of your main house only. This is the house that you usually spend most of your time in. Vacation homes cannot excluded from capital gains tax.

First time home-buyers are required to repay the credit if they do not use the property as their primary residence for more than 36 months after getting a home-buyer credit. The details should be filed with your tax returns using form 5405 the year you stopped using the house as your primary residence.

Be sure to let the IRS and the United States Postal Service know about any changes in address so that you do not lose correspondence and refunds from them.

The IRS publication for selling your home, 523, can be found on their website www.IRS.gov or call 800-TAX-FORM (800-829-3676) to receive a copy.