Major Tax Changes are Coming for 2011

After January 1, 2011, the Bush tax cuts of 2001 and 2003 expire and you can expect some major changes in your tax bill. Upwards changes. Expect the largest increase in taxes in history … and during a recession. Here are some of the taxes set to hit you in 2011:

Dividends Tax – currently as low as 15%, it could jump to 39.6%. Since this will change the incentives that many corporations have for paying dividends, double check the stocks you own for those likely to cut back on payouts.

Income Tax – The top personal income tax rate will rise from 35 to 39.6 percent. Congress is fighting this out right now, so we have until December to see whether only the richest will see their taxes rise while the middle calsss tax cuts remain.

Capital Gains Tax – The capital gains tax will rise from 15 percent this year to 20 percent in 2011. This will affect the stock market volatility near the end of the year.

Family taxes – The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half to $500 per child.

Estate Tax – The estate tax ended as of Jan. 1, 2010, but it returns in 2011. There is a $1 million exemption per individual and top tax rate of 55%. Many people will be buying life insurance policies to pay estate taxes in case they die.