Even in Connecticut $400,000 a year is wealthy.
Deficit May Snap 12-Year Tax Winning Streak for Top-Earning Americans
By Margaret Collins, Bloomberg News
May 25, 2011 1:57 PM ET
For a married couple with two children in Connecticut, which has the third-highest state and local tax burden in the U.S., the increase in rates Obama has proposed, along with levies from health-care reform, mean their tax bill may jump to $142,160 in 2013 from $126,410 this year, or 12.5 percent, according to an analysis Fleming ran for Bloomberg News.
That’s based on $485,000 in earnings, $2,000 in interest on investments, $3,000 in dividend income and $10,000 in long-term capital gains, and the following deductions: $20,000 in mortgage interest and charitable donations of $10,000, said Fleming, who works for PwC’s private company services tax group in Boston and Hartford, Connecticut.
Under the tax-cut compromise passed in December, individuals generally may gift up to $5 million during their lifetime without paying tax. That threshold will revert to $1 million in 2013 unless Congress acts.
“Move that $5 million now to your children or grandchildren to lock that in if you’re afraid that will go away,” Beerman said. That way the appreciation on those assets is out of an estate, Beerman said.
The biggest federal tax breaks for individuals include those for mortgage interest, charitable contributions, state and local taxes, incentives for retirement savings and the exclusion for employer-provided health care, said Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington. Each of them would be “politically pretty toxic” to eliminate or reduce, Stretch said.
Phasing out the mortgage interest deduction would increase federal revenue by $214.6 billion over the next 10 years, according to estimates from the Joint Committee on Taxation in a March report by the CBO. Curtailing deductions for charitable giving would raise an estimated $219 billion over the next decade, the CBO study said.
Did I mention their $400,000 McMansion?