What's Changing During Tax Season?

Tax laws are complex and always changing. With any new administration, tax laws are adjusted that either ease the burden of the lower and middle classes (albeit very temporarily) or strengthen the tax shelter of the wealthy. In an article from the Wall Street Journal on February 7, 2011, many of the amendments that were made last year are set to expire in 2012. Therefore, in regards to tax law, always keep in mind that is like an energetic toddler, always moving and never consider one of life’s constants.

This year’s tax rates, per the Journal’s article, are listed below:

*Note: Single taxpayer rates are listed first, and married taxpayers rates are presented in parentheses.

Up to $8,500 (up to $17,000) à 10%

Up to $34,500 (up to $69,000) à 15%

Up to $83,600 (up to $139,350) à 25%

Up to $174,400 (up to $212,300) à 28%

Up to 379,150 (up to $379,150) à 33%

Above $379,150 à 35%

Notice the biggest jump in tax rates is when you cross the $34,500 mark as a single taxpayer, or the $69,000 mark as married taxpayers. That’s about the mark of lower-middle or middle class. Thus, the uproar that the middle class is the body most reprimanded for earning a higher income from one year to the next.

If you have investments and have to pay taxes on capital gains because you sold stocks or bonds this year (assuming the price of your security increased), the rates are at an all-time low. For taxpayers in the 15% tax bracket and below, the capital gains tax is 0%. For taxpayers in the 25% tax bracket (or above that mark), the capital gains tax is 15%. So let’s say you bought Apple’s stock (1 share) at $100 on April 1^st. On June 1^st, you sold the stock for $250. First of all, congratulations! Second of all, the price rose by $150. That is your profit. But wait; this is America. You pay taxes on that profit? How much? Fifteen percent of the $150, or $22.50. So your real profit is $150 - $22.50 = $127.50. Again, congratulations!

Click on THIS LINK to the Wall Street Journal article about 2011 tax law changes to acquaint yourself with other new changes!

http://online.wsj.com/article/SB10001424052748703675904576063903166546250.html?mod=WSJ_PersonalFinance_RightMostPopular