How will Obama and McCain change your tax bill?

Tony H. Chiang, CPA, Partner at Genske, Mulder & Co. LLP, for Progressive Dairyman

The provisions of the Economic Growth and Tax Relief Reconciliation Act of 2010 (EGTRRA), other than those made permanent, will soon expire beginning after 2010. The following are the list of major tax provisions of the Barack Obama and John McCain tax-bill proposals.

Issue	Barack Obama	John McCain
Individual income tax rates	Has proposed making the 10, 15, 25 and 28 percent rates permanent while restoring the pre-EGTRRA rates of 36 and 39.6 percent. Eliminate tax for seniors age 65 and older making less than $50,000 per year.	Has endorsed making all of the lower individual income tax rates in EGTRRA permanent.
Personal exemptions	Has not discussed increasing the exemption amount.	Has proposed increasing the dependant exemption (but not the personal exemption) by $500 each year beginning in 2010 until it reaches $7,000.
Child and dependant care tax credit	Make child and dependant care tax credit refundable and equal to 50 percent of child expenses less than $6,000.	Has not addressed.
Capital gain	Increase the maximum capital gains to 20 percent for those earning more than ($250,000 married couples) ($200,000 for individuals)	Maintain current dividends and capital gains rates at 5 to 15 percent.
Retirement savings	Make the saver’s credit refundable and change to a 50 percent match of the first $1,000 of contribution. Mandate automatic enrollment in 401(k)s and automatic IRAs.	Has not addressed.
Education tax incentives	Rename the Hope Credit to the American Opportunity Tax Credit and make it a refundable credit of 100% of the first $4,000 of qualified higher education expenses.	Has not addressed.
Earned Income Tax Credit (EITC)	Expanding the EITC to cover more families and children and increase the phase-out threshold for married filing jointly.	Has not addressed.
Mortgage interest	Refundable universal mortgage credit of 10 percent of mortgage interest for non-itemizers up to $800.	Has not addressed.
Social security taxes	Imposes additional tax of 2 to 4 percent (combined employer and employee) on workers with income above $200,000.	Has not addressed.
Health benefits	Income tax exclusion for employer-provided health benefits. Require employers to provide insurance or pay a percentage of payrolls to support the national plan.	Treat employer-provided health benefits as taxable compensation to employee for Federal Income Tax purposes. Create a refundable tax credit of $2,500 for individuals and $5,000 for families who purchase qualifying health insurance.
Alternative Minimum Tax (AMT)	Extending the 2007 AMT patch and indexing the exemption amount for inflation.	Extend an indexing 2007 AMT patch. Allow taxpayers to use most of the non-refundable personal credit to offset AMT liability. Increase the exemption by an additional 5 percent per year after 2013.
Estate tax	Make permanent estate tax with $3.5 million exemption and 45 percent estate tax rate. (Has not addressed whether the stepped-up basis of assets received from an estate will continue).	Make permanent estate tax with $5 million exemption and 15 percent estate tax rate. (Has not addressed whether the stepped-up basis of assets received from an estate will continue).
Business corporate tax rate	Retain the corporate income tax rate at 35 percent and broaden the Corporate Income Tax base.	Reduce maximum corporate income tax rate from 35 percent to 25 percent.
Small business expensing and depreciation	Has not addressed.	Allow first-year deduction of 3- and 5-year equipment purchased between 2009 and 2013, deny interest deduction for expensed equipment.
Domestic production activities deduction	Has indicated support of repealing the Code Sec. 199 for oil and gas companies.	Has endorsed repealing the Code Sec. 199 deduction.
Editor’s note: The phase-out of many current tax provisions and other tax law changes are ongoing. The candidates’ positions stated above are accurate as of Oct. 5, 2008; however, readers should consult their tax adviser to remain current on proposed tax changes and details.