New Tax Legislation May Save You Money

How much you can save as a result of the new tax law signed by President Bush last week depends on many factors. Proponents of the new law say the provision benefits almost all taxpayers. They say that not only will personal taxes be reduced, but economic growth will generate higher tax revenues as income and investment increase.
At the signing ceremony, President Bush called the new law “a victory for American taxpayers and a boost to the economy.”

Opponents of the new law say that only high-income taxpayers will receive relief. They argue that the economic growth provided by the bill has not been proven and that many provisions only increase the deficit. But how does the bill affect your taxes?
The new tax law has extended the capital gains and long-term dividend tax rates by 15% for another two years. For low-income taxpayers, the tax rate is 0%. The extension fee will expire at the end of 2010. After that, it will return to 20% for long-term income and the maximum income tax rate for dividends. The estimated cost of this reserve is $ 50.8 billion over the next decade. Visit:-
Critics say the discount rate is especially beneficial to the rich, partly because middle-income taxpayers haven’t invested too much.
Urban-Brookings tax policy estimates that taxpayers with incomes between $ 50,000 and $ 75,000 can save an average of $ 58 in 2009 tax payments. This is about 0.4% of the total tax liability before the extension. The average tax credit is $ 255, which is about 2% of your tax obligations. Only 23% of middle-income taxpayers make taxable investments. Taxpayers with incomes of $ 1 million or more can save an average of $ 32,111, or 3.3% of non-extended tax obligations. The average tax credit is $ 39,448, which is about 4% of your tax obligations. Eighty-one percent of the highest-income taxpayers make taxable investments.
Many middle-income taxpayers can see the benefits of AMT. The new law raises the revenue release level of AMT, which came into force in 2005. The new release level for 2006 is $ 42,500 for singles and $ 62,550 for co-filers.
Taxpayers may also use all non-refundable personal credits to offset AMT’s liability. Most of these credits are usually not allowed by AMT.
It is estimated that in 2006, 15 million other taxpayers will be protected from AMT. Most of these taxpayers come from households with incomes of $ 100,000 to $ 500,000. Average household savings range from $ 1,074 to $ 2,838.
The final adjustment package is aimed at breaking the $ 70 billion spending limit. To achieve this goal, lawmakers added some income growth to the bill.
The most controversial clause is to allow all taxpayers, not just taxpayers with an AGI of less than $ 100,000, to convert traditional IRA to Roth IRA from 2010. Proponents say it will increase income when the IRA pays taxes to switch. .. It is expected to generate $ 6.4 billion between now and 2015.
Critics say that reducing taxable savings also reduces future income. The conversion does not make sense for high-income taxpayers, but depending on your current income tax rate, you may decide to switch to loss. Those who want to enter a high income tax class at retirement may decide to switch.

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