President Obama’s Tax Plan Takes Shape

Much talk has been heard lately about the new tax hikes in the 2010-11 Federal budget. Here are the new proposals in a nutshell:

- The top tax rates will increase to 36% and 39.6%.

- The upper limit on the 28% tax bracket will increase about $20,000 (to $230,000 for married couples and $190,000 for single filers). This will result in a small tax decrease (about $1,000) for upper income taxpayers, but will not be enough to offset the tax increases.

- The tax on capital gains will rise from 15% to 20% for taxpayers in the two top tax brackets.

- A continued phase out of some itemized deductions and exemptions for those in the top two tax brackets (this was set to expire in 2010).

- Tax breaks for those in lower brackets for education and payroll tax credits will be made permanent (this was set to expire in 2011).

- New reporting requirements on the issuance of Forms 1099 would now include corporations (currently exempt) and landlords who pay contractors (such as plumbers) for services rendered.

- Continuing the estate tax exemption of $3.5 Million (this was set to go down to $1 Million in 2011).

- All small business stock sales would be exempt from capital gains and AMT if held more than 5 years