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What the New Tax Bill Deal Means for You

What We're Watching: Obama to Sign Tax Rate Extension Deal

President Obama is expected to sign the much-debated tax cuts extension and offer a public statement from the White House on Friday afternoon, according to two administration officials.

Despite objections raised by Democrats, and a lengthy delay of the final vote until late Thursday, the House of Representatives has passed an extension of the Bush-era tax cuts, keeping income tax rates for all wage earners at current levels.

The $858 billion bill, a product of negotiations between President Obama lawmakers also includes a cut in Social Security taxes. That means you'll continue to bring home more in your paycheck in 2011.

The tax-cut plan extends through 2012 the Bush-era reductions on income, capital gains and dividends taxes. The bill also extends unemployment insurance benefits through 2011, providing relief to thousands of jobless Americans who stopped receiving unemployment checks as of December 1.

Among other ways the extension of the new law affects you:

• Your tax rates will remain at their current levels -- 10%; 15%; 25%; 28%; 33%; and 35%, based on your income. It also maintains lower tax rates on your investments for the next two years.
• If you make less than $90,000 a year, the bill provides an extension of the $2,500 credit you've been receiving to help pay for college tuition, which was begun under last year's economic stimulus bill.
• It will be easier for you to provide for your children. Under the Bush bill, you got a child tax credit of $500. That has now increased to $1,000.

The legislation also allows businesses to completely write off any capital investment made from Sept. 9 through the end of 2011.

House Democrats favored an extension of rates of the middle class and an increase to a 39.6% rate of the wealthy.  The new legislation contains a provision that would exempt estates under $5 million from the estate tax and tax any excess at a rate of 35%. Democrats had wanted to raise the top rate on estate taxes to 45% on inheritances of more than $3.5 million.

If you have any questions, please contact your Alpern Rosenthal tax professional.

For more information  http://www.accountingtoday.com/news/White-House-Plans-Scale-Back-Tax-Cut-Extension-2012-56670-1.html

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