by Richard Schneider
Retired professor of accounting
First I need to correct an item from my last article. Taxpayers 70 1/2 and older may transfer up to $100,000 from their IRA to a qualified charitable organization, not just $10,000.
What’s in store for 2009 when it comes to tax changes under the Obama administration? My tax services Kiplinger and RIA Check Point are weekly and daily tax news services and are the source for the following information.
When Barack Obama was elected there was and is an air of high expectation of a better future. He had promised tax relief for low and middle incomers, and an increase in tax for the wealthy, well lets see what the crystal ball says will happen.
1. Expanding the Earned Income Tax credit, increasing the income cap to qualify for the credit.
2. The Child Credit will be fully refundable. Currently the credit offsets tax and in certain cases where the tax is less than the credit, may be partly refundable depending on amount of tax and earned income.
3. No income tax for seniors with income less than $50,000. It is unclear what age qualifies for senior status, 50, 55, 60, 62, or 65. Will the $50,000 limit include the full amount of social security benefits?
4. A stimulus rebate, in the form of reduced tax withholding for workers, in stead of mailing out checks. This could happen as soon as February.
5. Prevention of the tax rate reduction on estates over $3.5 million, keeping it at 45%. This will help pay for some of the cuts.
6. Temporary fix for the Alternative Minimum Tax.
7. The maximum tax rate for long term capital gains and qualified dividends will increase to 20% from 15%, on a prospective basis. That is the change will affect gains realized from the date of enactment on, and not gains realized before that date.
8. In 2010 or 2011 there will be a restoration of the 36% and 39.6% tax rates for taxable incomes of over $250,000.
9. Pulling the plug on tax breaks for oil companies, related to oil drilling and production activities.
Remember these are guesses by the above tax services, and the actual future tax laws may differ considerably.
Good tidings from Social Security
by Cherryl Kjos
Winona Social Security District Manager
As the holidays approach, Social Security has good tidings to share with Social Security and Supplemental Security Income (SSI) beneficiaries: they will receive a 5.8 percent increase in benefit payments beginning with the January payments!
The 5.8 percent Cost-of-Living Adjustment (COLA) will begin with benefits that over 50 million Social Security beneficiaries receive in January 2009. Increased payments to more than 7 million SSI beneficiaries will begin on December 31.
Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year.
This 5.8 percent increase is the largest since 1982.
Along with the annual COLA comes other changes, including an increase in the amount of wages subject to Social Security tax. In 2008, the maximum taxable amount was $102,000. Beginning in 2009, the maximum taxable amount will be $106,800. This change will affect about 11 million of the 164 million workers who pay Social Security tax. The tax rate remains the same: 6.2 for employers and employees, and 12.4 for the self employed.
In 2009 it will take $1,090 in taxable earnings to earn a credit of coverage for Social Security, up from $1,050 in 2008. All workers can earn up to four credits in a year.
The average retired worker will receive $1,153 per month in Social Security benefits in 2009, up from $1,090 in 2008.
People who have Medicare coverage will want to visit Medicare’s website at www.medicare.gov for changes coming in 2009.
As always, you can find a wealth of information about Social Security at our website, www.socialsecurity.gov.