End of Bush Era Tax Cuts

The Bush tax cuts, dubbed after former President George W Bush, enacted in 2001 and 2003 will expire by the end of the year. In 2010 the tax cuts have been extended by the Obama Administration and in order for them to remain in effect, Congress would have to vote on an extension. Additionally, a payroll tax holiday signed by President Obama and other measures enacted as part of the economic stimulus in 2009 will expire in January. The nonpartisan Tax Policy Center estimates that the tax burden for the average American could rise by as much as $3,446 in 2013.

With the political bickering and bipartisanship in Washington, a solution to the problem seems more and more unlikely. Some of the most significant changes if the Bush era tax cut expire are:

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• Individual income tax rates will go up in 2013, the 10 percent tax rate will be eliminated all together. Income that is taxed at 10 percent at the moment will increase to 15 percent, the top income tax bracket will increase from 35 to 39.6 percent; 

• The maximum child credit for dependent children under the age of 17 is currently $1,000 and will decrease to $500; 

• The standard deduction for married couples filing jointly be reduced by $200, from currently $11,900 to $9,900; 

• Dividend income rates which are currently as low as 15 percent will increase to up to 39.6 percent; 

• Depending on the tax bracket, long term capital gain will be 10 percent for people in the 15 tax bracket or below (currently 0 percent) and will be taxed at 20 percent for people above tax bracket 15 (currently 15 percent); 

• The 2 percent rollback on the employee portion of FICA taxes will expire (FICA = Federal Insurance Contributions Act, taxation on income earned, funds are used for federal benefit programs); 

• College education credits will be eliminated.

Autor: Laura Hien