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    Expiring Tax Provisions – What Will Congress Do?
    The Vault

    Expiring Tax Provisions – What Will Congress Do?

    July 2012

    Our firm gets asked a lot of 'what will happen with tax rates?'. Today I was listening on NPR about the current debate regarding the Bush Tax Cuts and thought it might be useful to share some information we presented to the clients of our firm a few weeks ago. Below are a list of expiring tax provisions, including the Bush Tax Cuts, but some others that are also very important to businesses, like the Research and Development Credit.

    Bush Tax Cuts:

    Provision Current Law If Cuts Expire
    10% Bracket $8,700 - $17,400 for single / joint Eliminated – 15% bracket
    Top Brackets 35%, 33%, 28%, 25% 39.6%, 36%, 31%, 28%
    Cap Gains / Dividends 15% 20%
    Itemized Deductions No limits 3% reduction above $169,550
    Personal Exemption No restrictions 2% reduction for each above $169,500 / $254,350 s/mfj
    Child Tax Credit $1,000 / refundable $500 / non refundable
    Adoption Any adoption Special needs adoptions
    Provision Current Expired
    Standard Deduction – Married Couples 200% Single 167% Single
    15% MFJ Bracket 200% Single 167% Single
    Earned Income Phase out increased MFJ Phase out same as single
    Employer Provided Education Up to $5,250 excludable Fully expires
    Student Loan Interest $2,500 deducted from AGI, $125,000 - $155,000 income levels – MFJ Only first 60 months interest, $60,000 - $75,000 MFJ
    Educational Savings Accounts $2,000 contribution - $190,000 - $220,000 MFJ income limitation $500, $150,000 - $160,000 MFJ income limitation
    Estate Tax $5m Exemption, 35% rate $1m Exemption, 55% rate

    Other Expiring Provisions:

    Individual Business
    Teacher Expenses Deducted Above the Line Research & Development Credit
    Deduction for State / Local Taxes Misc. Work Credits
    Tuition Expenses Deducted Above the Line 15 Year Leaseholds – ability to depreciate
    Alternative Minimum Tax Refunds Bonus / SEC 179 Limits (Depreciation)
    Energy Efficient Appliances Built In Gains Tax Reduction / Time Limits – C Corp to S Corp conversions
    Alternative Fuel Credits Alternative Fuel Credits
    Various Disaster / Other Energy Credits (e.g. SEC 179D)


    The total estimated value associated with these provisions, as calculated by the Congressional Budget Office – is approximately $5.4 trillion over the next ten years – in other words if Congress simply does nothing then the federal government will increase revenue by $5.4 trillion.

    While this list is fairly comprehensive and alarming, Congress does have a track record of making last minute bargains on things like depreciation treatment.

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