The estate tax is returning but will offer a generous exemption. It is expected to exclude the first $5 million for single individuals and $10 million for those that are married. These generous exemptions mean that most Americans won't owe any estate tax upon their death. Those with estates larger than $5 million ($10 million for married couples) would be taxed at a rate of 35% on the amount in excess.
Payroll Tax Reduction
There will be a slight reduction in payroll taxes for most people that will last for one year. This will result in a small increase in take home pay for most people.
Aid for the long term unemployed is extended for 13 months.
Income Tax Rates
The current income tax rates would be extended for two years on all income levels if the law passes. If the legislation does not go through, all Americans would be subject to tax rates that were in place in 2001. A married couple with two children earning $75,000 in household income would pay about $2,500 more per year in taxes.
Bad News For The Deficit?
The expense of the tax cut will add to the deficit. This is expected to really become an issue when Congress faces a vote on raising the debt ceiling in the spring. If the debt ceiling is not raised, the government will run out of money. Most analysts expect the new wave of conservatives to vote to raise the debt ceiling only in exchange for major government spending cuts. What is most disturbing is that legislators can't set aside their voracious appetite for pork, even in these days of financial crisis that we live.
While nothing is 100% for sure, it appears likely that the tax cut legislation will go through prior to Congress leaving for the year. This will remove the uncertainty that has been hanging over the economy for that last few months. Whether you support the tax cuts or not, a little clarity is good news for everyone.
Don't forget that this is a great time to consider some end of year tax moves.
Helping you make the most of God’s money!