How the 2010 tax bill will impact you
Update: President Obama signed the bill into law on Dec. 17.
In a landslide victory on Wednesday, the Senate passed the massive tax plan that was the result of a compromise between President Obama and Republican leaders. And at midnight last night, Congress approved the plan by 277 to 148. President Obama is expected to sign today.
Not everyone is happy about it, to say the least, but even if it’s not the mythical Perfect Tax Bill, there are still some positive takeaways for consumers. Here are a few (and check out Jane Bryant Quinn’s excellently thorough blog post on the topic for a longer list.)
- Workers will receive a two-percentage-point drop in payroll taxes: The rate on wages up to $106,800 will drop from 6.2% to 4.2%.
- Unemployment benefits will be extended an extra 13 months, helping the long-term unemployed stay eligible for the maximum payment period of up to 99 weeks. This means an extra boost for the economy as a whole, since the unemployed tend to spend the extra money they receive—on bills, rent, food, etc.—as opposed to wealthier people, who are more likely to be able to save.
- Income- and capital-gains tax rates will stay where they are instead of rising.
- Tax credits for college worth up to $2,500 will continue, making it easier for students to afford tuition in 2011 and 2012.
- The estate tax will shrink. If you’re one of the lucky few with serious money to pass on to your children (or receive from a family member), the government will take a smaller chunk of it. You can leave your children up to $5 million ($10 million per couple) tax-free, with the rest of it taxed at 35%. Compare that to last year’s rate of 55% taxed on gifts over $1 million.
And the bad news: Taxes for some federal workers will be higher, and very low-income families will see a slight rise in their taxes, too. Meanwhile, the bill itself will cost the country $858 billion over the next decade. There’s a reason so many progressives are angry these days. But for the long-term unemployed and other Americans who will get to keep a little bit more money in their pockets next year, there are some concrete benefits.
What do you think of the tax plan?