Taxes in the New Year

For now we can rest a little easier. For the next two years we won’t be shelling out more than we have already towards the federal income tax. Actually, thanks to a temporary reduction of the payroll tax, Americans will see a slight increase in their paychecks come January. Those without jobs will also continue to receive aid. Unemployment “benefits” for the long-term jobless are going to be continuing on into 2011 as well.

In the long term, the country’s taxpayers will be paying the price for this. We will all experience foreseeable budget cuts, higher taxes on the back end, and maybe a lower standard of living.

So here is the breakdown for the present. We will just have to embrace the “deal with tomorrow when it gets here” philosophy I guess.

Investment Income

Tax rates on long-term capital gains and qualified dividends will remain at a maximum 15% through 2012, and those in the two lowest income-tax brackets — 10% and 15% — will continue to enjoy a 0% capital-gains rate.

Paychecks

one-year reduction in the payroll tax that funds Social Security. FICA taxes will drop from 6.2% to 4.2% for most workers. The self-employed will see a decrease off 2% as well. Workers must be participants in the Social Security System to receive the payroll-tax holiday.

Deductions

In the past tax benefits were reduced as certain income levels were exceeded. Now, families in the upper-level income bracket can enjoy claiming until their hearts content. There will be a continued “no-cap” policy on exemptions and deductions.