After weeks of intense debate, Americans can rest assured that their taxes won’t go up come Jan. 1. An average American family could have seen their taxes raised by $3,000 if the tax-cuts were left to expire.
The Republicans and Democrats finally came to a bipartisan agreement Monday evening. In a statement addressed to the American people, President Obama stated:
“As for now, I believe this bipartisan plan is the right thing to do. It’s the right thing to do for jobs. It’s the right thing to do for the middle class. It is the right thing to do for business. And it’s the right thing to do for our economy.”
Through this agreement, the Republicans claimed victory on extending the Bush tax cuts for the wealthiest Americans, which comprise about 2 percent of the American population. They initially wanted the Bush tax cuts to be extended permanently, but conjured a two-year extension instead.
Obama was unable to hold to his 2008 campaign promise, which would have allowed tax-cuts to expire for those Americans earning more than $250,000 a year. To answer his Democratic critics, Obama stated that “…Republicans will block a permanent tax cut for the middle class unless they also get a permanent tax cut for the wealthiest Americans…”
In exchange, the Democrats prevailed by securing two years of tax cuts for middle-class Americans. Middle-class families will still be able to benefit from the following tax credits:
Earned Income Tax Credit: Individuals and families who earn low-to-medium income from a job, self-employment or another source and meet other requirements can help keep more of their hard-earned money in their pockets. Those who qualify for EITC can receive a credit up to $5,666 for workers with three or more qualifying children, or as low as $457 for workers with no qualifying children.
Child Tax Credit: Depending on an individual or family income, a nonrefundable $1,000 credit can be claimed for each qualifying child. A child must meet certain tests, such as relationship, age, residency and even citizenship tests, before the credit can be claimed.
American Opportunity Tax Credit: Once again, parents and college students can get a credit up to $2,500 per student per year for the cost of college expenses. Qualifying taxpayers who make under $80,000 or under $160,000 for those married couples will most likely receive the full $2,500 credit. Those who earn higher than these amounts can still receive some credit to offset college costs.
Under President Obama’s tax-cut plan, 2 million Americans will have unemployment insurance extended for another 13 months. This comes as great news to many American families that are struggling during this holiday season. In addition, Obama also agreed to a 2 percent employee payroll tax cut for workers next year, which is favored by economists from both parties.
President Obama reminded Americans that these tax-cuts are only temporary, and continued efforts and conversations between both parties will be needed to determine a course of action that will help decrease the national debt.
Barack,Obama.Statement by the President on Tax Cuts and Unemployment Benefits.White House
Preview 2010 EITC Income Limits, Maximum EITC Amount and the EITC-related Tax Law Changes. IRS
Ten Facts about Claiming the Child Tax Credit. IRS
Six Facts about the American Opportunity Tax Credit. IRS