I thought the end of tax season would slow us down, but we’re still pumping trying to finish up the extensions and payroll quarterly tax returns for clients.  Hang in there – we’ll get to you!

This week’s tax post is focused on what you can expect for higher income tax payers (probably in 2011).  Obama is going to let the economy recover before sticking it to the higher income taxpayers in the US.  Here are some things coming down the pipeline:

1. The upper income tax brackets are currently 33% and 35% for the highest income tax payers.  In 2011, they will probably be increased to 36% and 39.6% for those making over $250k per year.  The lower brackets would likely be unaffected.

2.  Capital gains will likely go up as well.  The maximum capital gains rate is set at 15% currently, and will be raised to 20% for those in the higher income tax brackets.

3.  Obama is also going to start targeting the itemized deductions for higher income taxpayers.  He will probably try to lower what can be deducted for the higher income tax payers (those in the 28% tax bracket, or higher).  This will lower what the higher income tax payers can deduct in all itemized deductions, including charitable donations, mortgage interest, and property taxes.  This may not go over too well even in Congress.

4.  But it’s not all bad – though the estate tax exemption is going back to only $1 Million dollars in 2010, Max Baucus, a Senator from Montana, is writing legislation to push this exemption up to $5 Million in 2010.  With estate tax rates going to 55% in 2010, this is going to be significant changes for estates.  It’s either up for vote now or has already passed.

Thanks, Jason M. Blumer, CPA