Tax Legislation

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Higher, More Complicated Taxes Ahead

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Last week, President Obama released his first budget proposal for Fiscal Year 2010. Most of the attention has focused on total spending ($3.55 trillion) and the total deficit ($1.75 trillion). However, the budget includes several tax provisions that are worth discussing now, especially for those of you who qualify as “wealthy."

Specifically, Obama proposes to let the Bush tax cuts expire for individuals making over $200,000 and households making over $250,000. This means that "marginal" rates (the rate you pay on your last dollar of income) would climb from their current 35% back up to 39.6%. Tax on long-term capital gains (gains from the sale of property you hold more than 12 months) would climb from their current 15% back up to 20%.

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Stimulus Plan Tax Highlights

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You don't live "off the grid," so you know that last month President Obama signed the "American Recovery and Reinvestment Act." While much of the news focuses on the spending provisions, it also includes $287 billion in tax cuts.

I’m writing this week to make sure you don’t miss any of the highlights. Here are the most important provisions:

  • A new refundable "Making Work Pay" credit for 2009-2010 to offset the first $400 of Social Security tax you pay ($800 for joint filers). It phases out as your "adjusted gross income" (AGI) tops $75,000 ($150,000 for joint filers).