Will Obama's New Tax Proposal Affect You?

When President Obama revealed that his State of the Union address on Tuesday evening would include a tax reform plan, middle-class Americans threw a collective fist pump in the air, as his proposal would hike up taxes for wealthier Americans, extending tax credits on the middle class in turn. Exactly how the proposal plays out in D.C. is subject to question, as the new Republican-led Congress will surely present a huge, stubborn obstacle in its path. While easing middle class tax burdens are typically welcome, who, exactly, will Obama's tax proposal benefit?

Later on Saturday, the White House released details of Obama's tax plan, and they look pretty promising so far. Senior administration officials said that Obama will raise the capital gains tax on top income earners — you know, those people who ship ounces of Golden Imperial Osetra caviar from Russia for their granddaughters debutante party (yes, maybe I got that from Gilmore Girls), or whatever — and increase fees on American banks and financial firms.

Revenue from those changes will fund new tax credits and other cost-saving measures for middle-class workers, said officials, which is excellent news for us regular humans. Here is a breakdown of who the tax proposal might affect.

Working Spouses

The White House statement said that Obama will, in his State of the Union speech, propose a second earner credit amounting to $500 to help cover the extra costs faced by families in which both spouses work.

While $500 might be chump change for the 1 percent, an extra few hundred bucks could go a long way for households looking to pay their mortgage or a down payment for a car — more specifically, about 24 million couples, according to the statement.

Parents

Raising a child has to be one of the most emotionally and psychologically demanding jobs ever, not to mention the financial toll it takes. Childcare is a major household expense, amounting to about 20 percent of a moderate-income family's salary. Obama's proposal would streamline and expand childcare tax incentives, giving middle-class families up to $3,000 in tax cuts per child.

The plan would help 5.1 million families cover childcare costs for 6.7 million children.

College Students

Obama's plan would improve the American Opportunity Tax Credit, giving more students as much as $2,500 a year, over the course of five years, while they're in college. The White House said that the president would cut taxes for 8.5 million families and students, as well as simplify taxes for over 25 million families and students that claim education tax benefits.

This comes on the heels of Obama's earlier announcement of providing a free community college education to those willing to work for it.

Soon-to-be Retirees

The State of the Union address is expected to include a tax reform plan that would make it easier for an additional 30 million workers to save for retirement through their employer.

Image: Getty Images (4)