Tax bills are lower this year, but they will increase

When it comes to our federal government, it seems that nothing good lasts forever. While most of us had lower tax bills due to all the nice tax credits this year, taxpayers earning higher incomes will soon find themselves paying more. I recently read an article published in The Huffington Post indicating that the economic recovery package this year included about $300 billion in tax cuts over 10 years. $232 billion of which, were tax cuts for individuals.

This past year, Congress cut individuals’ federal taxes this year by hundreds of billions of dollars even while state taxes increased to pay state budget deficits. But while tax bills were low for most taxpayers, we need to expect our tax bills will definitely go up in the next few years. What are the reasons for the increases, you ask? For one, former president George W. Bush’s tax cuts will be expiring in January (only a few to be renewed) and then there are Obama’s future increases in the health care overhaul. While some increases will hit lower income taxpayers, those making more than $200,000 ($250,000 for couples) a year will see the largest increase. For the first time, the Medicare payroll tax would be applied to investment income, beginning in 2013. A 3.8 percent tax will be imposed on interest, dividends, capital gains and other investment income for individuals making more than $200,000 a year. Read the full article here.