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Tax Rates Going Up

E-mail|Link Posted by Cheryl Costa June 9, 2009 10:51 AM

Not that any one is surprised, but tax rates are on their way up. Last month, the Obama administration outlined its plans to impose higher taxes on individuals earning $235,000 and higher. Many were surprised to see the higher rates imposed at that level given the President's campaign pledge to only raise taxes for people earning $250,000 or more. However, aides to Obama maintained that there was no change in policy. They said that the $250,000 figure referred to adjusted gross income (AGI) while the $235,000 figure refers to taxable income. (As they explained, someone with a gross income of $250,000 would have a taxable income of about $235,000 if you subtracted the standard deduction and two exemptions.)

Beginning in 2011, there will be at least three tax increases. Taxpayers in the 33 percent tax bracket will see their tax rate increased to 35 percent, while taxpayers currently in the 35 percent tax bracket will see their rate increase to 39.6 percent. This year, the 33 percent rate applies to taxpayers with taxable income greater than $209,000 and the 35 percent rate applies to taxpayers with taxable income greater than $373,000. The third tax increase applies to the maximum tax rate on capital gains. That maximum rate is now 15 percent and it is expected to increase to 20 percent in 2011 for taxpayers who are above the 28 percent bracket.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master�s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.