How the New Tax Deal Affects Your Family

How the New Tax Deal Affects Your Family

Lots of debate is swirling about Obama’s tax deal with the GOP to extend the Bush Tax Cuts. How does it affect you? A win? Or a loss?

Using the tax calculator created by the Urban Institute and the Brookings Institution, GoLocalProv compared how a family of four would fare if the Obama tax deal passes and how they would do if the Bush tax cuts expire and no comprise is reached.

We examined four families across the income spectrum—$30,000, $75,000, $250,000, and $1,000,000. To keep things simple, we used the example of a married couple where there is one breadwinner and both children are claimed as dependents under the age of 17 in tax year 2011. Also, to provide another point of comparison, we ran the numbers for a married couple without children and with one breadwinner earning $60,000.

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Of course, a number of other factors go into determining how families would be affected under each scenario, such as: income from capital gains and dividends; deductions for mortgage payments, state and local taxes, charitable contributions; and the costs of college and childcare if your children are on the older or younger side.

How does the Obama tax deal affect your family? Use the calculator.

Every family benefits, some more than others

Below are the five hypothetical scenarios. In general, every family profiled below—regardless of income level—stands to gain something from extending the Bush tax cuts, as proposed by President Obama. As might be expected, those with higher incomes have a lot more to gain—or lose.

For example, a family of four with two children would have a tax liability of $3,510 more if the Obama deal isn’t approved. A family with a household income of $250,000 would owe about $5,000 more in taxes while a family making four times as much would owe nearly twice as much in taxes, or $9,225.