Home > Strictly TAXES! > Tax Increases ARE Coming~Unless Congress Takes Action! (Part 4)

Tax Increases ARE Coming~Unless Congress Takes Action! (Part 4)

Tax Cuts Are Scheduled To Sunset! 

(Part 4)

If you’ve been reading my posts over the past few weeks (I hope you have!), you know that we, as american taxpayers, are scheduled to experience an increase in our tax bill to Uncle Sam over the next few years~beginning with this upcoming tax season. There are numerous tax cuts that are set to expire unless congress reinstates them before the end of this year. If they are allowed to “Sunset”, we will all pay more tax!
In my previous writings to you, I’ve outlined some of the changes that will take place if nothing is done. Today, I want to explain a few of these changes that will affect anybody that has a dependent child(ren) under 17, anyone who may be attending college and those taxpayers that traditionally qualify for the earned income credit. These particular changes are scheduled to take effect for the 2011 tax return. (Not this upcoming tax season~but next.)
Here they are:
  • Earned Income Credit – This refundable credit currently has four categories of low-income working taxpayers, with the credit increasing as the number of children increase, up to three or more. In 2011, the “three or more children” category will go away, and taxpayers with three or more children will have to use the two or more category. This can reduce the credit for low-income taxpayers with three or more children by up to about $600.
  • Child Credit – The tax law provides a tax credit for each of a taxpayer’s children under the age of 17. This credit will drop to $500 (was $1,000 in 2010) per child. Since this credit phases out for higher-income taxpayers, it will generally impact lower-income taxpayers.
  • American Opportunity Education Credit (AOEC) – This credit took the place of the Hope Education credit in 2009 and 2010. Where the Hope Credit is non-refundable (can only offset one’s income tax liability), the AOEC was 40% refundable, and where the Hope Credit is for only the first two years of post-secondary education expenses, the AOEC allowed a credit for the first four years of post-secondary education expenses. In addition, prior to 2009, the Hope credit was limited to a maximum of $1,800 per student but the AOEC maximum was $2,500 per student. If the AOEC is not extended, low-income taxpayers will lose out on the refundable feature of the AOEC and those students in their third and fourth year of post-secondary education. Middle-income taxpayers will also be affected, because the point at which the credit phases out due to income limitations was 60% higher under the AOEC than under the Hope credit rules. Higher-income taxpayers are generally not affected since both credits are phased out for higher-income taxpayers.
As you can see, some of these tax cuts are really beginning to hit close to home, as they affect the average american, working class taxpayer. I’m not here to make any political statements, but these are the facts concerning the increases that we will all experience if our congress does nothing before the end of the year.
I’m not done with highlighting all the changes! There is still more to come. Stay Tuned!!
E-File Florida is very happy to help you with questions regarding these “Sunset Rules”. Feel free to contact our office by calling 954-583-8534 or by email at info@efileflorida.com. You can also visit us on the Internet at http://www.efileflorida.com for more great tax tips and articles.
IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s).
Esther Hastings, EA

E-File Florida helps individuals and small business owners to lower their tax bills and maximize their tax refunds. We actually enjoy getting to know our clients and have built a solid reputation of delivering excellent personal service while maintaining the highest level of integrity within the tax preparation industry. We welcome the opportunity to make you a Raving Fan!

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