Tax cuts set to expire
Tax cuts passed in 2001 and 2003 begin to expire this year and in 2009, with the bulk of them sunsetting in 2011. Here's what will happen unless Congress extends them:
Provision Reduction Expiration
Individual income tax rates Top four rates reduced beginning in 2001. Today's rates are 10%, 15%, 25%, 28%, 33% and 35%. In 2011, rates are scheduled to revert to 15%, 28%, 31%, 36% and 39.6%.
10% bracket Bottom bracket created in 2001. Now applies to first $7,550 of income for individuals, $15,100 for couples. It is indexed for inflation. It would be eliminated in 2011.
Marriage penalty Tax rates and deductions were changed so that married couples pay no more than they would if they filed as individuals. In 2011, many married couples again would pay more than they would pay as individuals.
Child credit Credit for children younger than 17 increased from $500 to $600 in 2001 and 2002, and to $1,000 in 2005 through 2010. It goes back to $500 in 2011.
Estate tax Top rate gradually reduced from 55% in 2001 to 45% in 2007; exemption gradually increased from $675,000 to $3.5 million in 2009; tax eliminated in 2010. In 2011, tax reinstated with top rate of 60% and $1 million exemption.
Capital gains Rates reduced from 10% and 20% to 5% and 15% in 2003; 5% rate, paid by those in lower tax brackets, reduced to zero in 2008. In 2009, rates revert to 10% and 20%.
Dividends Rates reduced from standard income tax rates to 5% and 15% in 2003. Tax eliminated for those in lower tax brackets in 2008. In 2009, rates revert to standard income tax rates.
Alternative minimum tax Exemption increased to $40,250 for individuals, $58,000 for couples. In 2006, exemption reverts to $33,750 for individuals, $45,000 for couples.
Sources: Office of Management and Budget; Joint Committee on Taxation; Deloitte & Touche USA
Tax cuts passed in 2001 and 2003 begin to expire this year and in 2009, with the bulk of them sunsetting in 2011. Here's what will happen unless Congress extends them:
Provision Reduction Expiration
Individual income tax rates Top four rates reduced beginning in 2001. Today's rates are 10%, 15%, 25%, 28%, 33% and 35%. In 2011, rates are scheduled to revert to 15%, 28%, 31%, 36% and 39.6%.
10% bracket Bottom bracket created in 2001. Now applies to first $7,550 of income for individuals, $15,100 for couples. It is indexed for inflation. It would be eliminated in 2011.
Marriage penalty Tax rates and deductions were changed so that married couples pay no more than they would if they filed as individuals. In 2011, many married couples again would pay more than they would pay as individuals.
Child credit Credit for children younger than 17 increased from $500 to $600 in 2001 and 2002, and to $1,000 in 2005 through 2010. It goes back to $500 in 2011.
Estate tax Top rate gradually reduced from 55% in 2001 to 45% in 2007; exemption gradually increased from $675,000 to $3.5 million in 2009; tax eliminated in 2010. In 2011, tax reinstated with top rate of 60% and $1 million exemption.
Capital gains Rates reduced from 10% and 20% to 5% and 15% in 2003; 5% rate, paid by those in lower tax brackets, reduced to zero in 2008. In 2009, rates revert to 10% and 20%.
Dividends Rates reduced from standard income tax rates to 5% and 15% in 2003. Tax eliminated for those in lower tax brackets in 2008. In 2009, rates revert to standard income tax rates.
Alternative minimum tax Exemption increased to $40,250 for individuals, $58,000 for couples. In 2006, exemption reverts to $33,750 for individuals, $45,000 for couples.
Sources: Office of Management and Budget; Joint Committee on Taxation; Deloitte & Touche USA
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