THIS IS IMPORTANT!!! The Bush Tax Cuts Let's go back in time to 2001: After the tech bubble burst and post-9/11, we were in the midst of a recession. To encourage consumer spending and boost the economy, President Bush initiated legislation that lowered tax rates on income and investments.  The legislation also affected estate planning, lowering the tax rates on estates, gift tax and generation skipping transfer taxes, and increasing the exemptions.  There were also some personal exemptions and deductions thrown in. However, these laws were set to expire at the end of 2010 (meaning that on January 1, 2011,  tax rates would go back up to the 2001 rates).  In 2010, President Obama wanted to let the tax cuts expire (and thus increase taxes) only on the wealthy, but he was persuaded by his advisors to extend the tax cuts for everyone at least until the economy starts to recover. Thus, the Tax Bill of 2010 was passed, extending the Bush tax cuts and keeping tax rates low -- but only for two years . So here we are in October 2012 and this means we are coming to another tax deadline -- and fast.   If no legislation is passed to extend the tax cuts for another year or to make them permanent -- tax rates will go up on everyone on January 1, 2013, just 2 1/2 short months away . Of course, controversy is brimming between the parties on whether to extend the tax cuts, make them