Tax Cuts and Implications
As an additional way to communicate with our clients, we are starting our blog. Our goal is to address current topics and provide information on financial decisions as well as tax matters. We would appreciate your input as well. If there is a topic you would like to see addressed, please let us know. Topics for the blog are broad. We would be happy to address any specific questions on an individual basis. Just email us or give us a call. We are always accessible to our clients or future clients.
With that said and with the elections behind us, our first topic is the Bush Tax Cuts. Regardless of your political affiliation, the facts of the tax cuts are the same. Below we have summarized some of the Bush Tax Cuts and their implications.
15 Percent Tax Rate Bracket for Joint Filers. Marriage penalty relief that increased size of the 15-percent tax bracket for joint filers to twice the size of the corresponding rate bracket for single filers is scheduled to expire for tax years beginning after 2010 (Code Sec.1) This tax bracket will disappear. Here is a table of our current tax brackets
Married Couples Filing Jointly Most Single Filers
|
Tax Rate
|
2009 taxable income
|
2008 taxable income
|
2009 taxable income
|
2008 taxable income
|
|
10%
|
Not over $16,700
|
Not over $16,050
|
Not over $8,350
|
Not over $8,025
|
|
15
|
16,700-67,900
|
16,050-65,100
|
8,350-33,950
|
8,025-32,550
|
|
25
|
67,900-137,050
|
65,100-131,450
|
33,950-82,250
|
32,550-78,850
|
|
28
|
137,050-208,850
|
131,450-200,300
|
82,250-171,550
|
78,850-164,550
|
|
33
|
208,850-372,950
|
200,300-357,700
|
171,550-372,950
|
164,550-357,700
|
|
35
|
Over 372,950
|
Over 357,700
|
Over 372,950
|
Over 357,700
|
Standard Deduction for Married Taxpayers. The increased standard deduction amounts for married taxpayers based on the amount allowed for single taxpayers are scheduled to expire for tax years beginning after December 31, 2010. The basic standard deduction will be $5,000 for joint filers and $2,500 for married taxpayers filing separately, both as adjusted annually for inflation (Code Sec. 63) under the current tax law it is:
Married filing jointly or Qualifying widow(er) $11,400
Head of household $8,350
Phase-out of personal Exemptions. The elimination of the phase-out of personal exemptions for higher income taxpayers is scheduled to expire for tax years beginning after 2010. Higher income taxpayers will have to reduce the amount of their personal exemptions when their adjusted gross income exceeds certain thresholds (Code Sec. 151 (d)(3))
2009 Personal Exemptions:
| Filing Status |
Phase-out Begins |
Phase-out Ends |
| Married Filing Jointly |
250,200 |
372,700 |
| Qualifying Widow(er) |
250,200 |
372,700 |
| Head of Household |
208,500 |
331,000 |
| Single |
166,800 |
289,300 |
| Married Filing Separately |
125,100 |
186,350 |
Alternative Minimum Tax Exemption. The Alternative Minimum Tax exemption amounts for tax years beginning after 2009 are $45,000 for married individuals filing joint returns and surviving spouses, $33,750 for unmarried individuals and $22,500 for married individuals filing separate returns (Code Sec. 55)
As a result of this phase out, at a certain point you are no longer entitled to take any AMT exemption. You lose this exemption if your AMT income is $191,000 (if you are married filing separately), $273,500 (if you are single or filing as head of household) or $328,000 (if you are married filing jointly or a qualified widow or widower).
If you would like to discuss your specific tax situation and the effects of keeping or allowing the tax cuts to expire, please contact us.
Tax Compromise Update
