Will the extension of the Bush tax cuts be the antidote for the slumbering US economy? Although too soon to tell, providing any sort of tax help to taxpayers is definitely a step in the right direction.

The economic woes continue to hit taxpayers hard, especially those in the lower and middle class. Taxpayers are seeing rising costs, reduced services, fewer jobs and increased limits on essentials, like insurance and health benefits.

The tax relief provided by the Bush tax cut extension is a welcome sight, not just to help pay the essentials but as a positive psychological boost going into 2011.

So how exactly does the income tax reductions provide tax relief? Here are the details of these income tax rate reductions:

• Lower tax rates for taxpayers regardless of income.
• 10% Tax Bracket – Extends through 2012 the 10% individual tax bracket, the lowest tax rate for those individuals making up to $8,500 and married couples making up to $17,000. If the tax cut extension is not approved the 10% tax rate increases to 15%.
• 25%, 28%, 33% and 35% Tax Bracket – Extends through 2012 the current tax brackets that are set to expire at the end of 2010. The top tax rate 35% applies to those individuals making over $379,150 annually. If the tax cut extension is not approved the 35% tax rate would increase to 39.6%.
• Temporarily Repeals Itemized Deduction Limitation – extends repeal of itemized deduction limitation for two years for high-income earners.

No doubt taxpayers will continue to struggle into the new year, and any sort of tax help is what’s needed to ride it out.

Source: cbs.com