More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Long Term Care Insurance: Premiums While premiums for qualified long-term-care insurance may be deductible as medical expenses there are exceptions to this general rule. Learn how to avoid unnecessary tax liabilities.
If you’re wondering what your taxes will be in the various proposals regarding the Bush-era tax cuts, the Tax Foundation gives three possibilities.
In the midst of all the discussion about cuts for the wealthy vs. cuts for the middle class/poor vs. no tax cuts for anyone, the Tax Foundation created possible tax bills for several hypothetical families based on the three most likely scenarios: the complete expiration of the Bush-era tax cuts at the end of 2010, the Republicans’ plan of continuing the tax cuts for everyone, and the Democrats’ plan of renewing the cuts only for individuals earning under $150,000 and families under $250,000.
The Foundation, a nonpartisan tax research group based in Washington that advocates lower, simplified taxes, has also enumerated specific provisions of the Bush cuts, which included:
- making more married taxpayers eligible for the earned income tax credit (EITC);
- creating the 10% income tax bracket;
- raising the standard deduction for couples;
- increasing the child tax credit; and
- changing five different tax brackets.
The Foundation has created tables to show the difference in taxes among those three scenarios. For example, while there would be no difference between Democratic and Republican plans for taxpayers with income up to $150,000, according to Table 1, for a family with an income of $300,000 and two children, under complete expiration of the cuts, the tax bill would be $76,616; under the Republicans’ plan, it would be $64,971; and under the Democrats’ plan, it would be $68,392. The tax rates under those circumstances would be, respectively, 25.5%; 21.7%; and 22.8%.
The Foundation has also set up a FAQ page for those who wonder about more specific aspects of the tax situation.