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Learn what recent legislation means for you, your family, your tax liability, and your job prospects for 2011.
Some people party all night long in anticipation, while others struggle to keep an eye open just to claim they witnessed it. Either way, New Year's Eve marks a celebration of the end of a year and hope for the New Year to come. The anticipation of the changing year may also bring with it a reminder to use up those earned days of vacation before you lose them; submit receipts against any monies you may have allocated toward a health savings account; or make last-minute charitable contributions, so you can deduct them from your taxes.
In Washington, D.C., however, the anticipation of the New Year carried a different tone, as political wrangling ensued among lawmakers in early December to address tax legislation enacted by the former President George W. Bush that was scheduled to expire on New Year's Eve.
After a lot of give and take among Democrats and Republicans alike, compromise legislation finally appeared on President Barack Obama's desk. And with two weeks to spare, the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 on December 17. The goal of the new legislation is to provide vital tax relief and investments in American workers that will create jobs and accelerate economic growth by extending existing tax rates for Americans across all income levels another two years.
A Middle-Class Victory
At the core of the legislation is what the President calls a "substantial victory for middle-class families across the country." Remarking at the signing of the legislation, he added, "They're the ones hit hardest by the recession we've endured. They're the ones who need relief right now. And that's what is at the heart of this bill."
Without new legislation, a typical working family would have seen a tax increase of more than $3,000 on January 1, 2011. This bill, however, avoids such a possibility by extending the existing income tax rates.
Other benefits for 2011 include the following:
In addition to helping families, the legislation also includes tax incentives to help businesses grow and thereby spur job growth. For example, the new legislation allows companies to temporarily expense 100% of their investments in 2011 on their taxes. This program could generate upwards of $50 billion in additional investment in 2011, and provide funds for these same companies to expand operations, purchase new equipment and, perhaps most important to you and your family, hire more workers. Such actions are expected to spur economic recovery and boost employment figures.
After a year of massive unemployment, growing debt, and economic uncertainty, the fact that your income taxes won't increase and that tax incentives are in place to boost your paycheck, and to help you get a handle on affording college education and ensuring your family's livelihood, is definitely something worth celebrating.
Note: When it comes to taxes, seek the counsel of a financial expert who can identify which deductions will impact your bottom line most effectively once you are ready to file your taxes. Look in your local Yellow Pages or ask friends and family members for referrals to a certified public accountant who can help you with your specific situation.
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