Tax Law Center Blog

By Parag P. Patel, Esq.

Tax-Plan Highlights

Here are some of the details of President-elect Obama’s tax plan.

INCOME TAX
Maintain current tax rates of 10% to 28% for most Americans. Reinstate top tax rates of 36% and 39.6% on joint income of more than $250,000 ($200,000 for individuals).

CAPITAL GAINS/DIVIDENDS
Maintain maximum rate of 15% for most taxpayers. Boost top rate to 20% for investors with income of more than $250,000. Under current law, taxpayers in the two lowest income-tax brackets pay zero capital gains in 2008, 2009 and 2010. Eliminate capital-gains taxes on start-ups and small businesses to encourage innovation.

RETIREMENT ACCOUNTS
Suspend mandatory distributions for those 70½ and older. Permit taxpayers to withdraw up to $10,000 from retirement accounts penalty-free; withdrawals would still be subject to income taxes.

NEW TAX CUTS
Tax credit of up $1,000 to offset Social Security taxes for low-wage earners. Eliminate income tax for seniors making less than $50,000. Double the tax credit for college expenses to $4,000. Create a 10% mortgage tax credit for those who don’t itemize. Provide a $1,000 rebate funded by a windfall-profits tax on oil companies to offset high energy costs.

AMT
Maintain current exemption and index to inflation.

ESTATE TAX
Set exclusion at $3.5 million per person ($7 million per couple); keep rate at 45%.

SOCIAL SECURITY
Maintain current wage base of $106,800, indexed for inflation. Impose additional tax of 2% to 4% paid by employers and employees on earnings exceeding $250,000 — but delay implementation for at least ten years.

CORPORATE TAX
Keep top rate at 35%; close corporate loopholes.

About the Author

Parag P. Patel, Esq. brings over three decades of experience to individuals and businesses facing complex tax problems. Holding advanced degrees from Georgetown University Law Center (J.D.) and New York University School of Law (LL.M. in Tax Law), the nation’s top tax programs, Mr. Patel delivers sophisticated and creative strategies in complicated federal and state audits, penalty abatements, and foreign asset/income reporting. His practice emphasizes international tax matters, specifically foreign financial account reporting (FBAR), voluntary disclosures, and penalty defense.

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