Taking Time For a Few Tax Changes in 2011

With the holidays long gone and another New Year in full swing, ‘tis the season for 2010 tax filings, full of important tax changes for personal filers.  Here a few reminders of things to look out for as you work to get your returns in order:

(1) Payroll Tax Holiday
2011 is the year of the “payroll tax holiday.” This means that taxpayers subject to Federal Income Contributions Act tax (or FICA) for Social Security and Medicare will see a tax break of 2% in their paychecks up to the Social Security cap during the year, which is $106,800 for 2011.

(2) Standard Deductions
According to WalletPop, “The standard deduction rates -- or the amount that you can claim if you don't itemize your deductions -- stay largely the same for 2011. They are $5,800 for single taxpayers or those married taxpayers filing separately, $11,600 for married taxpayers filing jointly and $8,500 for taxpayers filing as head of household. The additional standard deduction allowed for senior citizens and taxpayers who are legally blind is $1,150 for married taxpayers filing jointly and $1,450 for single taxpayers.”

(3) Personal Exemptions
The personal exemption amount for 2011 saw a small increase to $3,700, up from last year’s $3,650.

(4) Income tax rates
Due to the recent Congressional tax deal, extending existing tax breaks, this year’s tax rates for the various brackets remain near 2010 levels. Keep in mind adjustments accounting for inflation. 2011 tax brackets include:

Single

$0-$8,500 -  10%

$8,500-$34,500 -  15%

$34,500-$83,600 - 25%

$83,600-$174,400 -  28%

$174,400-$379,150 - 33%

$379,150+  - 35%

Married Filing Jointly

$0-$17,000  - 10%

$17,000-$69,000  - 15%

$69,000-$139,350 - 25%

$139,350-$212,300 - 28%

$212,300-$379,150 - 33%

$379,150+ - 35%

Head of Household

$0-$12,150 - 10%

$12,150-$46,250 - 15%

$46,250-$119,400 - 25%

$119,400-$193,350 - 28%

$193,350-$379,150 - 33%

$379,150+ - 35%

Married Filing Separately

$0-$8,500 - 10%

$8,500-$34,500 - 15%

$34,500-$69,675 - 25%

$69,675-$106,150 - 28%

$106,150-$189,575  - 33%

$189,575+ - 35%

(5) Alternative Minimum Tax (AMT)

The AMT exemption for 2011 is $74,450 for taxpayers filing jointly, $48,450 for single taxpayers or heads of household, and $37,225 for married couples filing separately.
(6) Pease and PEP limitations

If you are a high-income taxpayer, you’ll benefit from a temporary repeal of the personal exemption phase-out and "Pease" limitations, allowing you to hold onto exemptions and the full value of itemized deductions for an additional two years.

(7) Capital Gains and Dividends.
Lower rates for capital gains and dividends have been extended through 2011.

(8) Flexible Spending Accounts
This year, over the counter medications are generally no longer eligible as Flexible Spending Account expenses unless a doctor writes a prescription for the medications, with insulin being a significant exception.

(9) Health Care Benefits Reporting
As part of the new health care law, this year your employer must report health care benefits for employees. As a result, your health care benefits will appear on your W-2 in 2012, without affecting your taxable income.

(10) Foreign Account Reporting
President Obama’s new Hiring Incentives to Restore Employment (HIRE) Act  imposes additional reporting and disclosure requirements on your income tax return for U.S. taxpayers with any interest in certain foreign assets worth more than $50,000.

And, as always, if you’re considering bankruptcy in 2011 and are concerned about the tax implications, including when to file, whether you can keep your tax refund, and any other factors in your personal circumstances that might require consideration, it’s important to speak with an experienced bankruptcy attorney who can competently guide you on the right path to the best result. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-833-627-0115, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.