Last night President Obama delivered his annual State of the Union address, which left those of us in the tax world thinking about three words: The Buffett Rule.
These were two of the key proposals the President outlined in his address, which zeroed in on tax reform as part of his “Blueprint for America”. The President called for the following changes that would directly impact individual taxpayers and small businesses:
- Extend the 2 percent payroll tax holiday through 2012; keeping payroll tax at 4 percent instead of 6.2 percent of wages
- Extend the $2,500 American Opportunity Tax Credit that taxpayers can take for each of the first four years of college for each student
- Keep tax rates the same for families making less than $250,000
- Require families making more than $1 million to pay a minimum tax rate of 30 percent
- Limit deductions for Americans making $1 million or more a year
- Expand tax relief to small businesses that create jobs and increase wages
What’s important to remember is that the hotly debated Buffett Rule won’t likely affect the more than 98 percent of everyday American taxpayers. For those, it’s the credits and deductions like the American Opportunity Tax Credit, the payroll tax reduction and the package of expired tax “extenders” – like the educator expense deduction and tuition and fees deduction – that make the biggest difference at tax time.
Our team of experts at The Tax Institute at H&R Block is keeping track of those changes so that our tax preparers have all the information they need when it comes to making sure you get the most money back each year.
“There is a lot of debate on what will finally be put forth to tackle what is an increasingly complicated tax code,” Gil Charney, principal tax researcher at The Tax Institute at H&R Block. “We are following it all, which ultimately should make it easier for taxpayers to navigate the system but we want to make sure it is done in a way that will benefit and not hurt them.”
Don’t worry. We’ve got this.