Taxmageddon: What is it?
While there is still talk about certain taxes about to expire at the end of the year, here is information on what the 'talk' is all about.
The tax system, as we know it, is about to expire. On January 1, 2013, unless Congress acts beforehand, taxpayers will be on the hook for an estimated $500 billion in taxes. This tax hike is being coined as Taxmageddon.
Taxmageddon would affect taxpayers at all levels of income. The average household would see a tax increase of $3,800. If this situation happens, we will see a tax hike unlike any other time in history.
Already gone (unless Congress acts)
As of December 31, 2011, the following tax breaks are gone:
- The Energy Credit for home improvements such as insulation...
- The refundable feature of the Adoption Credit
- The above the line deduction for teacher's classroom supplies
- The deduction for mortgage insurance premiums
- The deduction for sales taxes instead of income taxes
- The 15 year cost recovery for leasehold improvements in retails
- The above the line deduction for tuition
- Tax-free distributions from IRAs for charity
- Alternative Minimum Tax limitations saving middle-income taxpayers
About to go (unless Congress acts)
- The following tax breaks are scheduled to expire on 12-31-2012.
- The 10% tax bracket - gone
- The other rates will be modified to reflect the exit of the 10% bracket.
- Marriage penalty relief - gone
- Reduced tax on dividends - gone
- Reduced tax rates on capital gains - gone
- The Dependent Care Tax Credit qualifying expense is scheduled to be reduced from $3,000 per child to $2,400.
- The Dependent Care Credit percentages will be lower for many.
- The Child Tax Credit will be reduced from $1,000 to $500.
- The refundable portion of the Child Tax Credit will be limited.
- The American Opportunity Tax Credit - gone
- The Earned Income Credit income ranges would be lowered
- The 45% Earned Income Credit for three or more children - gone
- Discharge of debt from a personal residence will not be excluded from income unless the taxpayer is bankrupt or insolvent.
- Additional first year depreciation will be limited.
- The student loan interest deduction will be limited.
- The 2% payroll tax holiday will be over.
- Personal exemptions will again phase-out for taxpayers with high income.
- Itemized deductions will again phase-out for taxpayers with high income.
- Expensing limits for business property will be reduced.