As you may have noticed, Congress has decided to play double-or-nothing with our money in an attempt to get the economy reinflated in time for the next election. Their recent legislation is a combination of reckless spending of other people’s money and increased tax code complexity, the combination of which, along with eye of newt and toe of bat, will stimulate the economy, or at least so said the Impresss Your Economey With 5t!mu1is emails that have been going around lately.
Some of these tax provisions may be of interest to folks who are using the DON Method of income tax resistance:
- For tax years , the bill
provides a refundable tax credit of up to $400 for individuals and $800
for families. This credit is equal to 6.2% of earned income, but phases
out for taxpayers with adjusted gross incomes over $75,000 ($150,000 for
married couples filing jointly). This effectively offsets a portion of the
payroll tax (or self-employment tax). If you’re employed, your employer
may begin withholding less
FICA
from your paychecks. If you’re self-employed, you’ll end up owing less
self-employment tax.
- Also, if you’re self-employed and you file quarterly estimated tax payments, in the past you’ve had to try to hit the lesser of two target marks: either 90% of whatever you will owe this year, or 100%–110% of whatever you owed last year (depending on your adjusted gross income). In , things will be a little different: either 90% of what you will owe this year, or 90% of whatever you owed last year. If you don’t hit the target, you can get hit with a penalty.
- If you have three or more qualifying children in your family or if you
file jointly, you may find that you receive a larger-than-usual tax credit
via the
EITC.
- Also, the refundable child tax credit will increase for tax years .
- There’s already the Hope and the Lifetime Learning credits, at least I don’t remember those going away, but now there’s yet another education tax credit: The “American Opportunity” Education Tax Credit. This can reduce your tax bill by up to $2,500 for money you spend on college tuition, books, and fees. Unlike the other credits I mentioned, 40% of this credit is refundable, so the government will reimburse you for some of your college expenses even if you don’t pay any income tax.
- Last year, Congress decided to try to reinflate the housing bubble by providing a “credit” to first-time home buyers. I put “credit” in quotes because it was really an interest-free loan that the home-buyer would have to pay back in installments. The new bill makes this credit a real credit that the buyer doesn’t have to pay back. If you buy your first home , Congress might hand you $8,000 of other people’s money in the form of a refundable tax credit to help you out.
- You can deduct the state sales tax you pay when you buy a new motor vehicle. I’m not sure where this deduction applies, but presumably it’s not just an itemized deduction.
- The feds won’t tax the first $2,400 of your unemployment benefits .
- Expensing and depreciation rules, particularly for small businesses, are
liberalized (and some
too).
- Also, small businesses that lost money can redistribute these losses to offset gains during . I think this means that you can refile your tax returns for those years and declare additional businesses losses that can offset business gains in those years and thus lower your taxes, enabling you to file for refunds of taxes you paid long ago.
- Under current law, businesses can take a tax credit for the expense of
purchasing and installing wind energy generators, and individuals can
take a similar tax credit for solar water heating, wind energy generating,
geothermal heat pump stuff. The credits are equal to 30% of the expense,
but there used to be a ceiling above which the credit couldn’t go. The
new bill eliminates the ceiling, so your credit is only limited by how
much tax you owe and how much you spend on this stuff.
- The bill also increases the credit percentage and the credit cut-off ceiling for credits for energy-efficiency improvements by homeowners.
- The bill also increases the tax credit for the purchase of electric motor vehicles
- Your employer can give you a tax-free public transit or parking fee reimbursement of up to $230 per month.
