- Golden Corral coming to Cape; may hire 100 workers (7/21/16)9
- Arrest warrants filed for six drug suspects in Cape (7/19/16)6
- Area groups working together to reintroduce elk in Missouri (7/18/16)1
- Suspect in downtown Cape shooting ID'd in court (7/20/16)2
- Prosecutor says shooting by state trooper was justified (7/24/16)15
- Hastings in Cape closing (7/22/16)5
- Governor signs Rep. Swan bill that equalizes child-custody criteria (7/6/16)5
- City may spend extra park tax money on Cape Splash, skate park, other projects (7/25/16)10
- Jackson's former police dog euthanized Monday (7/21/16)2
- 'I want to see how far I can go' (7/21/16)2
Breaks go to workers, families with tax cut
WASHINGTON -- A $330 billion tax cut being completed by Congress will provide bigger paychecks for some workers, breaks for married couples and parents and investment opportunities for businesses. It also may make filing tax returns next year more complicated.
The House was finishing putting together and voting on the tax cut late Thursday. The Senate is expected take a final vote today.
More than half the benefits are directed to workers and families and are retroactive to Jan. 1. They should start seeing the impact by July. "Without doing anything, people will see more money in each paycheck," said Don Weigandt, a financial planner with the J.P. Morgan Private Bank.
Income tax rates will fall 2 percentage points for middle-income workers and 3.6 percentage points for those in the highest bracket. Those in the lowest brackets -- at 10 percent and 15 percent marginal rates -- will not see their income tax rates change.
Those paying the new marginal tax rates will see additional money in their paychecks during the second half of the year as companies make up for taxes overpaid in the first half. For example, an employee in the 27 percent bracket will see his top income tax rate fall to 25 percent, but for the next six months, only 23 percent will be withheld.
Next year, the withholdings will jump back up.
Parents who qualified for a child tax credit last year will see a windfall later this summer. Most parents will get a check from the Internal Revenue Service worth $400 per child, an advance refund to reflect an increase in the child tax credit beginning Jan. 1.
For this year and next, married couples' standard deduction will rise to twice that of single taxpayers. And the 15 percent bracket will widen for married couples filing jointly. As a result, some couples will pay less of the "marriage penalty" -- a structure in the tax code that causes married couples to pay more tax than two single individuals.
The combination of benefits for individuals caused some observers to estimate that nearly every taxpayer will pay lower income taxes after enactment of the bill. "Everyone should get something out of this," said Mark Luscombe, a tax analyst at CCH Inc.
Robert Greenstein, executive director of the Center on Budget and Policy Priorities, said 36 percent of households will see no tax benefit, particularly low-income, single taxpayers with no children.
"There's nothing here that affects you," he said.
Two provisions will give small businesses an opportunity to recoup equipment purchases and other investments this year, encouraging businesses to expand and entrepreneurs to start new ventures.
The items allow small businesses to write off $100,000 in investments this year. All businesses could depreciate half their assets this year, recouping their money faster. For example, Luscombe said, a small business that spends $150,000 on new equipment this year can write off $100,000 immediately and recoup half of the remaining expense through depreciation this year. As a result, a business can immediately write off as an expense at least $125,000 of its equipment purchases.
Investors will see the tax rates they pay on dividend income and capital gains fall to a top rate of 15 percent through 2008. Low-income taxpayers will pay 5 percent now through 2007, and nothing in 2008. Investors currently pay taxes on dividends at the same rates as ordinary income, as high as 38.6 percent, and capital gains held for more than one year are taxed at 20 percent. In 2009, tax rates on dividends and capital gains revert back to current levels.
Tax experts said expiration dates on some tax breaks, and the introduction of a new tax rate on dividends paid to stockholders, will complicate filling out tax returns next year.
"Different tax rates and different baskets of income, the result, inevitably, is tax complexity for the individual," said Leslie B. Samuels, former assistant Treasury secretary at Cleary Gottlieb Steen and Hamilton. "The tax bill is good for the economy of tax advisers."