Thursday, January 13, 2011

2011 Taxes

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010... It sure is a mouthful to say. A less complicated name for it: the tax bill that finally passed in congress and signed into law by the President about a month ago. How will this affect you? The bill provides a 2 year extension of the Bush era tax cuts. So you'll see the same rates this year as your taxes for 2010. The upper range for each tax bracket has been increased by 1.5% to account for for inflation. The standard deduction also increased by about 1.75% for the same reason; it is now $5,800 for single filers and $11,600 for married couples filing jointly. Below is a chart of the brackets and rates:

Tax Rate
Single Filer
Married Filing Jointly
Over $379,150
Over $379,150

A few months ago, it was suggested that there should be a tax raise for families earning over $250,000. Needless to say, judging by the chart above, this didn't happen. Tax rates remained the same for everyone. Actually, this bi-partisan bill added on a deal to cut payroll taxes by 2% in order to stimulate the economy more. This can mean roughly a $1,000 saving for a single filer with an annual income with $50,000. For the next few months, make sure you check your pay stubs to see if your payroll tax rate decreased from 6.2% to 4.2%. Your employer has until March 31 to make adjustments.

All in all, this is a pretty good deal right now for us average tax payers. We'll get more cash in our pocket. If your financial situation this year isn't likely to change from last year, you can probably keep your W-4 withholding the same. However, revisit your withholding allowance if your tax bracket changes.


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