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.