Taxpayer asks:
Taxgirl,
First …thank you for your time and effort. I am retired with an income just under 250K. ( 245K to 247K ) My income is a combination of pension ( teacher’s and law enforcement ) , soc security, income property- apartment. This year I also worked part time and earned about 12K.
First question is …I want to work pt time next year and hoped to earn about 15-20K. If I do I will be over 250K ( probably in the 260-270K range ) so how much more tax will I pay ? If I am going to get taxed allot more then it won’t be worth me working at all and I will try to stay under 250K. I am assuming the 250K is based on gross income ?
Second Question… if Osama is elected he come into office in Jan 09 when will the 250K tax rate increase take effect ? Would it be immediately effective Jan of 09 or will it take a year to get into effect which would give me all of 09 to work pt time ?
Last question is all the income within the 250K or is any exempt like pensions money ? investment income ? soc security ?
Thank you again for your input and assistance this is a very nice thing you are doing to help people.
Taxgirl says:
I’ll answer your second question first since I’ve actually gotten a large number of similar questions asking about the effective date of Obama tax plans (including those expecting a cut).
My answer is, unfortunately, not a great one: I don’t know.
The thing is, Obama may have a tax proposal but it doesn’t become law simply because he wants it to. Under the absolute best case scenario for him, his tax proposal would be ushered through effective January 2009 (it would not affect the tax year for 2008). But realistically, legislation – especially in a new presidency – takes awhile to push through. And it’s a bad economy to push tax cuts off the bat when there are expenses to be met. So, while everyone is itching for tax cuts, I believe that immediate and significant tax changes won’t happen in the first month. Clearly, I don’t have a crystal ball. So take that with a grain of salt. I’ll update as I get more information.
As to your first question, assuming that the tax proposal does not change (which I’m not sure is a good assumption), the $250,000 threshold that Obama referred to in his proposal was not gross income, it was AGI (adjusted gross income, found on line 37 on a federal form 1040).
To answer your third question, I’m not sure what will be exempted as the details have not been thoroughly fleshed out. But note that AGI includes only the taxable portions of Social Security, pensions and IRAs – it also includes net business profits and investments less any “above the line” deductions such as self-employment tax deductions, IRA deductions and HSA deductions. Those details – what income and which taxpayers to exempt, and under what circumstances – are exactly the kinds of questions that I expect to delay tax legislation. Again, Congress may well have very different goals than President elect Obama.
Bottom line: we all have our own timelines as to the speed of what we’d like to see happen. But there are a lot of factors that can accelerate or slow down progress on economic fronts. My best advice is to plan according to what the law is now – and keep reading to see what changes. I’ll keep you updated as I get information.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
This guy is retired, yet still has an income of almost $250K, and he’s worried about some infinitesimal increase in his marginal tax rate that might (and, given the state of the economy, might not) happen? We should all have such problems!
Urb
Well, my situation is quite different than this. Obama says seniors under 50K would pay no taxes. I am well under this figure. Withdrawing from IRAs and keeping income under 50K would eliminate tax on these IRA withdrawals? No tax on SS income? Sounds great to me. I am waiting to see.
Pension combination from teaching and law enforcement – and does not understand how our legislative system works? I hope he didn’t government. So if he works part time and makes 12k and he has to pay 50% (an figure picked out of the air) – he’ still got 6k left – or he can stay home and not get the 6k….our tax system as it is now will always leave you something – maybe not a whole lot – but something….my problem is I am already over 250 and have no idea what to do about it except grin and bear it…..and then I have to also remember that there are a whole big bunch of folks that would trade places with me in a heartbeat…..
” if Osama is elected he come into office in Jan 09 when will the 250K tax rate increase take effect ? ” was the Osama a typo…
Jess, I assume it was a typo. I didn’t change it because as a rule, I don’t edit questions – I figure my readers say what they mean. More about “ask the taxgirl” here: http://www.taxgirl.com/ask-the-taxgirl/
It should probably be pointed out that the $250K (or $200K or whatever it was down to by the end of the campaign) was based on a family of four–a point Obama seemed to go out of his way to obscure by constantly using the term “individuals” when what he really meant was family of four. The last week of the campaign he finally started using the term “households.” Many Obama supporters I talked to where surprised to learn that fact.
If the questioner is single with no dependent children and does not have substantial mortgage deductions, the higher tax will likely kick in around $100k, but there are so little actual facts in Obama’s proposal no one really knows..
Come on people even if you drop it down to $100K that is still less than 20% of the households in the US (http://pubdb3.census.gov/macro/032007/hhinc/new06_000.htm) and at $250,00 that is less than 2% of households who are we kidding here? IF this plan makes it through congress somewhere between 1 in 5 to 1 in 10 households will see some sort of tax increase. I just can’t feel sorry for people about this especially if you look at what the tax brackets were pre-Reagan.
I’m much more concerned about what the current financial crisis has to say about how we as a whole are blinded by greed. It didn’t really matter who won the election we are too far down a bad road to bring about any real meaningful change at this point.