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Will You See Higher Tax Rates in 2011?

The following information is reprinted with permission from Forefield, Inc.

The year was 2001. The top marginal federal income tax bracket was 39.6%, and the tax rate that applied to most long-term capital gains was 20%. Then came the Economic Growth and Tax Relief Reconciliation Act of 2001, followed two years later by the Jobs and Growth Tax Relief Reconciliation Act of 2003. By mid-2003, the top marginal tax rate was 35%, and the 20% capital gains rate had dropped to 15%. But this tax relief was designed to be temporary–the provisions that established lower rates were crafted to self-expire after a period of time. And now, in 2010, we’re only months away from seeing those provisions expire.

Federal income tax brackets

Right now, there are six marginal income tax brackets: 10%, 15%, 25%, 28%, 33%, and 35%. For 2010, these brackets apply to married couples filing joint federal income tax returns in the following manner:

2010 Marginal Income Tax Brackets
Married Filing Jointly
Taxable Income Marginal Tax Rate
Not over $16,750 10%
Over $16,750 to $68,000 15%
Over $68,000 to $137,300 25%
Over 137,300 to $209,250 28%
Over 209,250 to $373,650 33%
Over $373,650 35%

As it stands now, these marginal tax brackets will expire at the end of 2010. There would be no 10% bracket for 2011, and the remaining bracket rates would return to their original 2001 levels: 15%, 28%, 31%, 36%, and 39.6%.

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