With the presidential election about a month away, this month’s column will compare the tax positions that have been publicly taken by the Presidential candidates, Senator McCain and Senator Obama.
President Bush Tax Cuts
Senator McCain is in favor of retaining the tax cuts for all taxpayers.
Senator Obama is also in favor of retaining the tax cuts, but only for individual taxpayers with income under $200,000 and married couples with income under $250,000.
15% Tax Rate On Qualified Dividends and Long Term Capital Gains
Senator McCain is in favor of retaining this tax rate for all taxpayers.
Senator Obama is also in favor of retaining this tax rate, but only for individual taxpayers with income under $200,000 and married couples with income under $250,000.
Individual taxpayers with income over $200,000 and married couples with income over $250,000 would pay a 20% tax rate on qualified dividends and long term capital gains.
35% Top Tax Rate
Senator McCain is in favor of retaining this tax rate for all taxpayers. Senator McCain is also proposing an optional flat tax of either 15% or 25% on gross income, with no itemized deductions or personal exemptions.
Senator Obama is in favor of raising the top tax rate to 39.5% for individuals with income in excess of $373,000.
Social Security Tax
For 2008 employees will pay a 6.2% Social Security Tax on the first $102,000 of their compensation.
Senator McCain is in favor of retaining this tax rate for all taxpayers.
Senator Obama is in favor of retaining this tax rate, but also imposing an additional 6.2% Social Security Tax on compensation in excess of $250,000.
Alternative Minimum Tax
Senator McCain and Senator Obama agree that the alternative minimum taxes should be indexed such that it not affects middle class taxpayers.
Senator McCain also proposes adding another 5% exemption until it reaches $143,000 for married couples.
Estate Tax
Senator McCain proposes a top tax rate of 15% and a $5,000,000 exemption.
Senator Obama proposes a top tax rate of 45% and a $3,500,000 exemption.
Corporate Income Tax
Senator McCain proposes reducing the top rate from 35% to 30% in 2010 and then reducing it 15 a year to 25% in 2015.
Senator Obama is in favor of retaining the top rate of 35%.
2009 Indexed Tax Changes
The personal exemption will increase to $3,650 in 2009.
The standard deduction will increase to $11,400 for married couples, $8,350 for head of household and $5,700 for individual taxpayers n 2009
The annual gift tax exemption will increase to $13,000 in 2009.
Unlicensed Tax Preparers
A Treasury study has indicated that over 60% of tax returns prepared by unlicensed tax preparers contained reckless mistakes. There is currently a bill in Congress that will require unlicensed tax preparers to register with the Internal Revenue Service and pass a test before they are allowed to prepare tax returns.
Shareholders in Foreign Companies
Are you a US citizen and also an officer, director or shareholder in a foreign company? Do you own 10% or more of the stock in a foreign company? Have you been timely filing the annual Information Return of U.S. Persons With Respect To Certain Foreign Corporations?
If you have failed to do so, or do so late, staring in 2009, the Internal Revenue Service will subject you to an automatic $10,000 penalty.
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