Tax Law Changes Of 2012 Essay

1013 words - 5 pages

The bill officially titled “Unemployment Insurance Reauthorization and Job Creation Act of 2010 (HR 4853),” extended many of the Bush era tax cuts of “The Economic Growth and Tax Relief Reconciliation Act of 2001” (EGTRRA) that then President Bush signed into law. As per the announcement on Desire to Learn, I’ll call this new bill “The Bush Tax Cut Extension.” The bill was signed into law December 17, 2010. I am happy with most of the provisions and cuts as they positively affect most individuals’ lives in this country, including mine. The Bush Tax Cut Extension applies to small businesses as well but I will focus on the laws that affect mainly individuals. Working people, both rich and ...view middle of the document...

6% Instead they stay the same at brackets of 10%, 15%, 25%, 28%, 33%, and 35% regardless of income. The favorable treatment of capital gains and qualified dividends continues through 2012 also. The maximum net long-term capital gain rate remains at 15% even for an individual making $200,000 or more per year (0% for taxpayers in the 10% and 15% tax brackets). Qualified dividends continue to be taxed at favorable capital gains rates instead of at ordinary income rates. This is to encourage investing in stocks, bonds, and mutual funds which I believe will stimulate investing and the economy overall.

The Hope credit for the first two years of college has been eliminated; however, the American Opportunity Credit (AOC) is for the first four years of college studies with a maximum of $2,500/yr. One outstanding aspect of it is that up to 40%, or $1,000 is refundable, giving money back to working college students or parents who otherwise would have no tax liability. This is a really good provision which was extended beyond 12/31/10. I am getting married in 2011 and I am grateful to the marriage penalty relief being extended two more years. This doubles the standard deduction of single- $5,700 to $11,400 for a married couple and increases the combined earnings in the 15% bracket so that the same amount of tax would be paid if single or married.

For families with children, the $1,000 child tax credit is extended through 2012, or otherwise it would have reverted back to $500. Also, the higher Earned Income Tax Credit (EITC) amounts have been extended for families with three children. There was an Alternative Minimum Tax (AMT) “patch” that was passed to prevent middle income taxpayers from paying the AMT. The exemption amounts for 2010 had been increased to $47,450 for individual taxpayers and $72,450 for married filing joint and surviving spouses, and $36,225 for married couples filing...

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