2015 State of the Union Tax Proposals

01-21-2015Tax Information

President Barack Obama announced that he will propose tax increases for higher-income individuals and provide tax relief for middle-class taxpayers in last night’s State of the Union address. He wants to simplify the Internal Revenue Code, eliminating loopholes, and help “middle class families get ahead and grow the economy.”

While it remains to be seen when and how anything may be implemented, the president’s wish list includes:

  • Creating a $500 tax credit for dual-income families (credit would phase out for couples with incomes between $120,000 and $210,000);
  • Modifying various child care tax incentives for the earned income tax credit, tripling the maximum child and dependent care credit and eliminating child care flexible spending accounts;
  • Consolidate, but expand education tax benefits;
  • Eliminating the step-up in basis for assets that are transferred at death, treating transfers at death as realization events for capital gains tax purposes. (This will greatly affect estate planning for everyone);
  • Raising the top tax rate on capital gains and dividends to 28% for taxpayers with incomes over about $500,000;
  • Reforming retirement tax incentives, including automatically enrolling workers in IRAs, requiring employers to allow more part-time workers to participate in their retirement plans, and providing a cap of about $3.4 million in an IRA.
  • Time will tell…

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