Tackling Taxes: What The Deal Means for You

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President Obama and Congressional Republicans finally reached a tentative deal Monday to extend unemployment benefits and keep the Bush-era tax cuts for the next two years.

The deal, which still needs to be passed by Congress, would result in lost revenue to the government of $450 billion in 2011 to as much as $600 billion. That will be added to the nation's $13.8 trilllion deficit.

What the Tax Cutting Deal Means for Families, Workers and Employers

End to Bush Tax Cuts Looming Play
End to Bush Tax Cuts Looming

Families:

All Bush-era taxes would be extended for two more years for all American families including the wealthy.

Obama wanted to extend the tax rates to households making less than $250,000 while Republican lawmakers wanted a permanent extension.

Impact: The deal would continue the lower Bush tax rates on incomes under $250,000 per year for couples and $200,000 for individuals.

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The average U.S. household, with an income of $49,777, will continue to keep its tax cut of $2,142.

A family with earnings of $311,330, will keep $9,318 as opposed to the $8,012 the president wanted them to keep.

Workers:

13-month extension of unemployment benefits. The extension is expected to help about 9 million Americans.

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One-year Social Security tax reduction for employees, from 6.2 percent to 4.2 percent for individuals.

Impact: For example, a worker who makes $40,000 annually would receive $800 in tax relief and a worker who earns $70,000 would receive $1,400.

Child Tax Credit, Earned Income Tax Credit and the tax credit increases for college tuition (American Opportunity Tax Credit) adopted in 2009 as part of the economic stimulus package would be extended.

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Impact: Families would be allowed to get up to $2,500 per student for tuition credit.

About 22 million families would be exempted from the dreaded Alternative Minimum tax next year.

Employers:

The agreement will also allow businesses to deduct 100 percent of capital investments in 2011. Currently, businesses can write off 50 percent.

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GMA Quick Tips: Taxes

The agreement also calls for holding the estate tax at 35 percent for two years, with a $5 million floor.

ABC News' Jack Tapper, Sulen Miller, Bradley Blackburn, Alan Farnham and the Associated Press contributed to this report.

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