The following is a guest post about the new tax plan introduced by President Obama from Sara at Darn Good Blogging.
Major Tax Plans in Progress
At the end of 2010, all of the 2001 and 2003 tax relief packages implemented during President Bush’s presidency expired. As a result, this crucial question was raised in people’s mind, “where are the current tax rates heading in 2011?”’
Most taxpayers were anticipating steep tax hikes in 2011 and were waiting eagerly for congress to take urgent steps in this regard. Thankfully a host of changes were recently introduced by President Barrack Obama. Now we all wonder how much these changes will influence our tax situation and whether it will boost the economic recovery process and create jobs down the line.
Current Tax Plan Changes
- Changes are hopeful for married couples with 2 children who jointly earn at least $25,000. Since the Earned Income Tax Credit was increased during these tax changes, those couples’ refunds have increased by $385. This one of the 2011 tax credits is also refundable, which means that these couples will receive this credit even if they don’t owe a balance to the IRS.
- The tax rules are slightly different if a married couple has two children with one in college and their combined income is approximately $50,000. Their refund will shrink by $500 following the trend from 2008. That is when the family received a $1,500 economic stimulus payment, which was then shrunk to the $800 Making Work Pay credit they received for 2010.
- If a married couple with two children, including one in college, earns $200,000, their tax bill gets reduced by an average of $780 since limits on their deductions were entirely phased out.
- If a married couple has both the children in college, possesses huge investments, and has a joint income of $1 million or more, then their tax bill is reduced by an average of $6,740 since their deduction limits have been phased out too.
- As a result of inflation, the standard deduction and personal exemption increased considerably. These changes result in a tax bill reduction of $63 for a single person who makes $50,000 and has paid $2,500 in interest on his/her student loan.
These new implementations are expected to improve the economy (maybe even more than these energy tax credits in 2011). We can keep our fingers crossed and hope that these changes will create jobs and encourage private business owners to invest more.
Crystal’s Comments: This sounds like taxes were reduced for most people, but REALLY reduced for the very well off. Am I following that correctly?
It is confusing because “reduced” seems to really mean increased tax bill for certain people? Am I reading this correctly?
@Amanda, yes, when they talk about reduced savings, it means they’ll be paying more but when they talk about a reduced bill, it means they’re saving some.
The bottom line is to not expect a lot of surprises in the budget when it comes to taxes. There’s little room in the budget to expand tax credits or introduce new cuts. However, the President has to acknowledge that the middle class is continuing to suffer through the effects of the recession. After the address, there will likely be a lot of noise about tax cuts and tax breaks on both sides of the aisle in Congress – but don’t expect anything more dramatic to come of it than these few tax tweaks.
I need to get married and have children so that I can avail of these tax cuts.
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