Tax legislation provisions may surprise you
By WAYNE CURTIS/Guest Columnist
Most readers are aware that — after a great deal of heated discussion, colorful rhetoric, and skillful maneuvering — compromise legislation to extend the Bush tax cuts has been signed into law. But there are several aspects that may surprise you.
While the major thrust of the bill maintains current rates for all taxpayers for two more years, it also contains other provisions that could affect each of us, especially in 2011.
Let’s review some of the key provisions that could have an impact on your financial condition. First, if you are in the work force, your take-home pay will increase.
This is because — for 2011 only — your portion of the Social Security withholding tax will decline from 6.2 percent to 4.2 percent. If your income is $50,000 per year, your take-home pay will increase by $1,000. If you make $25,000, it will rise by $500.
The final tax bill also extends through 2011, a provision that allows homeowners with adjusted gross incomes of $100,000 or less to deduct private mortgage insurance premiums. If your income is between $100,000 and $150,000, you can claim a partial deduction. Experts estimate that the deduction will save the average borrower $300 to $350 per year.
Private mortgage insurance applies to most borrowers who make down payments of less than 20 percent on their home loans. The purpose of this type of insurance is to protect lenders from default.
A third provision extends tax credits for improving the energy efficiency of your home by installing new improvements such as insulation and windows. For 2011, however, the credit will decline to $500 from the current lifetime maximum of $1,500.
Another provision relates to educational assistance provided by employers. If your employer pays for you to go to school, this will continue to be tax-free to you. Through 2012, you can exclude up to $5,250 in educational assistance from income taxes.
Wayne Curtis, Ph.D., is on the board of directors of First United Security Bank. He may be reached by email at firstname.lastname@example.org.