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How else might you get a tax bite?

How else might you get a tax bite? Answers from Cook CPA Group. Certified public accountants in Sacramento County explain different ways to adjust your tax rates to save money.

The “2001 Tax Act” is set to expire at the end of this year, bringing back pre-2001 tax rates and rules. While the current discussions focus on the income tax rates that will rise if the law is allowed to expire, there are dozens of other major changes that will sunset too.

Here’s a quick overview of what 2011 will bring unless Congress intervenes.

  • The limitation on itemized deductions based on income will be reinstated in full.
  • The phaseout of the deduction for personal exemptions for higher-income taxpayers will be reinstated in full.
  • Married couples filing a joint return will not be entitled to twice the standard deduction amount allowed for single taxpayers. Nor will couples get the 15% tax rate on twice the amount of income as single taxpayers get. The marriage penalty, in other words, is back to pre-2001 levels.
  • The child tax credit and the dependent care credit will revert to pre-2001 levels.
  • The maximum rate for capital gains will revert to 20%, and dividends will be taxed at ordinary income rates as high as 39.6%.
  • Among the changes to education tax breaks, the annual contribution to Coverdell education savings accounts will revert to $500.
  • The estate tax will return with a maximum rate of 55% and a exclusion amount of $1 million.

Your tax planning, as challenging as it already is, should take these potential changes into account. For guidance in your year-end planning, give us a call.