FORT WAYNE, IN (Indiana's NewsCenter) --- Taxpayers in Fort Wayne and across the country are trying to fully grasp what their income tax bills will look like if the Bush tax cuts are indeed extended in 2011.
The tax cuts make a big difference in how much you get to keep, and how much the government gets to take.
President Obama has cut a tentative deal with Congressional Republicans, which would allow the Bush-era tax cuts to stay in place for at least two more years.
If final approval is given, it means the child tax credit will remain at $1,000, letting parents hold onto $500 more per child.
In addition, the tax rate on the first $17,000 in earnings will stay at 10%, not 15%, preserving $850 in savings for those it applies to.
There’s good news for the wealthy as well.
Someone making $140,000 a year or more will pay three to four percent less in taxes than if the tax cuts went by the wayside.
That’s according to Jeff Sanderson, the tax director for the Fort Wayne certified public accounting firm of Baden, Gage & Schroeder.
Sanderson shared what he believes his clients will take away from the tax deal.
Tax Director Jeff Sanderson/Baden, Gage & Schroeder: " I think relief, not only that people know that their tax burdens are not going up, but also relief from the standpoint that a lot of uncertainty has gone away. They know how to plan, they know how to react and know what to expect in 2011."
The tentative agreement also calls for a 13-month extension of unemployment benefits for about nine million Americans.
That was a priority for Obama in the compromise.
The deal includes a one-year Social Security tax reduction for employees.
A worker who makes $40,000 annually would receive $800 in tax relief, while a worker who earns $70,000 would receive $1,400 in relief.
There’s another key component.
If the Bush tax cuts had expired, in the event of a death, an estate valued at more than $1-million would be subject to a 55% inheritance tax rate.
Under the compromise struck, only estates valued at more than $5-million would be taxed, and then only at a 35% rate.
Sanderson says the status of the so-called “Death Tax” could be changed in further negotiations.
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