Tax Highlights Expected in State of the Union Address Tonight

Here is a summary of tax highlights that could affect you.

The Obama administration believes that raising the capital gains rate, ending the inheritance loophole and adding a fee on financial firms will generate $320 billion in revenue over a decade. The President wants to redirect those monies into a series of measures aimed at helping middle-class Americans. Among them:

• A credit of up to $500 for families in which both spouses work. The administration says 24 million couples would benefit from the proposal, which would apply to families with annual income up to $210,000.
• Expanding the child care tax credit to up to $3,000 per child under age 5. The administration says the proposal would help more than 5 million families with the cost of child care.
• Overhauling the education tax system by consolidating six provisions into two, a move that could cut taxes for 8.5 million families. Republicans have been open to the idea of consolidating education tax breaks.
• The President's address will also include calls for lawmakers to increase paid leave for workers and enact broad cyber-security rules.
• The centerpiece of the President's tax proposal is an increase in the capital gains and dividends rate on couples making more than $500,000 per year to 28 percent, the same level as under President Ronald Reagan. The top capital gains rate has already been raised from 15 percent to 23.8 percent during Obama's presidency.
• Obama also wants to close what the administration is calling the "Trust Fund Loophole," a change that would require estates to pay capital gains taxes on securities at the time they're inherited. Officials said the overwhelming impact of the change would be on the top 1 percent of income earners.

Contact George Wilmoth, Kevin Rose, or any of your trusted advisors at HHM, today if you have any questions regarding this information.