Wednesday, December 14, 2011

Tax Changes for 2011

In our weakened economy, everything is suffering from losses and harder times. These times don't seem to be getting any better, and some even believe that things will get worse before they get better. Taxes are no different, and many of our credits, deductions and rates have all taken an unfortunate hit, much to the dismay of our taxpaying citizens. While these changes are projected from Obama's Tax Reform, knowing and understanding these changes can help you to preemptively plan your taxes. A safe assumption is that taxes will be on the rise, and these major changes will help to educate you on what to expect.

First, the tax credits that lower your taxable income have changed already and these are a few of the changes we will see in 2011. The Child Tax Credit is only allowing $500 per dependent child and has become more restricted on who will qualify. One credit that is getting eliminated is the Making Work Pay Tax Credit, unless Congress follows Obama's proposal. Another changed tax credit is the Hope Tax Credit, which goes back to only applying to the first two years at a university. The Energy-Saving Credits will be axed almost completely, and this will be the last year you can reap the benefits of your new energy-efficient appliances.

Tax deductions were also changed, and they have unfortunately changed for the worse as with the tax credits. January 1st, 2011 will be the end of allowing you to deduct insurance premiums on mortgages. The Business Expense Deduction in section 179 will be decreased from the most being $250,000. The exact amount it is now is still under discussion. Finally the Student Loan Interest Deduction changes by making only the first sixty months of the repayment deductible.

Tax brackets are changing very rapidly in this economic downturn. Those in the upper brackets will see a long term capitol gain increase five percent. This increase to twenty percent will be the dividend rate as well, and the other brackets will see increases as well, but the exact amount is not yet disclosed.

These changes are already being set into motion, but could be withdrawn if Congress intervenes. This tough economy is only going to get tougher as the taxes will inevitably rise. Only the President can decide between what he will do about the growing deficit and the rising taxes. With Congress and the public breathing down his neck on what he will do, we hope he makes the right decision and a fair compromise. Only time will tell what our future holds. Trusting someone with your taxes becomes that much more important. Use Online Tax Pros to get the most out of your return this tax season.

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