Victory, for now: On Friday December 17, 2010, President Obama signed a temporary two year extension of the Bush Tax policy. This averts the prospect of a massive tax hike. With only two weeks to spare, the President and Congress decided to put off this issue until 2012. For the time being, lower taxes remain, but this fight is not over.
Almost ten years ago, during the 2001 recession, President Bush and Congress passed a series of tax cuts. These tax cuts succeeded in bringing the USA out of a recession and led to years of economic growth! Unfortunately, due to some arcane budgeting rules that make sense only to members of Congress, the tax cuts contained an expiration date. That date was January 1, 2011.
|2011 - 2012||2013|
|10% and 15%||15% (expanded)|
Ten years later, in the midst of another recession, Barack Obama and Congress agreed to extend the tax cuts for two more years. Unfortunately, they still did not make the tax cuts permanent. Unless Congress acts again, taxes will still go up. For the next two years, tax rates remain stable. On January 1, 2013, everyone who pays income taxes is going to see their taxes go up. Starting with the family who can barely make ends meet all the way up to the multi-millionaire, everyone will pay higher taxes.
For 2011 and 2012, tax rates remain at the 2010 level. Beyond that, the law calls for a return to higher taxes. The current and new brackets are shown to the left. Capital Gains taxes will go to 20% from 15% and the dividend tax will go from a maximum of 15% to a maximum of 39.6%. For further details click here. This tax calculator will help you figure out how much it will cost you.
- In the calculator below, please choose your filing status (Single, Married Filing Jointly, Married Filing Separately, or Head of Household).
- Enter your wage income. If you want to enter your capital gains, etc. click here.
- Click Calculate to view the results.
Understanding the results:
This calculator returns three estimates of next year's taxes. These help you understand how you will be affected by the coming changes in tax law.
Today: The first calculation is the amount you will owe the Federal Government now that the Bush tax cuts have been extended. This would is the best case, as your taxes would not go up at all from last year.
The Future: The second number is how much you would pay when the tax cuts expire, and go back to their 2001 levels. This is the number if Congress does not act by January 2013. Congress pushed this off to the future, but America must remain vigilant. An expiration in 2013 would return the tax rates to the Clinton-era tax brackets. This is what will happen in 2013.