End of Tax Breaks: All You Need To Know About the Expiring Tax Breaks
There seem to be changes in the IRS tax code every single year. The only advantage they have is that they keep accountants employed.
It is important that you stay informed about tax code changes regardless of whether you use computer software to do your taxes or you have your accountant do it for you. Knowing changes in the tax code will help you to file the right returns and get your refund quickly.
The first tax breaks to go are Bush Tax Cuts that gave high income earners huge tax deductions. They are expected to expire towards the end of 2012. The expected changes will affect:
When Bush tax cuts are phased out, people will have to pay higher taxes when they retire. Taxpayers who benefited from Bush tax cuts should convert to a Roth IRA, as this will allow them to pay taxes upfront and enjoy their full retirement benefits when they retire. This will save them the hassle of filing income tax returns in their old age.
Converting to the new Roth will be costly for taxpayers who benefited from Bush Tax cuts in 2010. Generally, they will have to pay up to 35 percent tax rate on a rollover. This rate may increase after these tax cuts expire.
Homeowners who lose their homes to foreclosures, a short sale, or had their debt reduced through mortgage restructuring will have to pay taxes on the difference between the actual debt and the new debt, or between the outstanding balance on the mortgage and the sum recovered from a short sale.
There are many other changes that will affect education and health care among other industries.
- Reducing Budget Deficit By Increasing Taxes (2011tax.org)
- 2012 Taxes And The Proposed 2013 Budget (2011taxes.org)