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.
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.
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