The White House and Congress have finalized the details and the President has signed off on the terms to avoid the "fiscal cliff". But what is coming up are fights over entitlements and the debt ceiling issue. We will cover these in the next few editions. On a summary basis, here is what may impact you now and throughout the year
First, what was NOT in the final outcome.
All wage-earners who have taxes withheld from their paycheck will see an impact in their first full check in 2013. Under the Social Security tax holiday granted two years ago, the 6.2 percent payroll tax was cut to 4.2 percent. In 2013, the amount withheld will go back up to 6.2 percent. If your annual salary is $50,000, expect to have about $1000 less in take home pay over the year or about $20 per week. If you earn $100,000 per year you will most likely see $40 to $45 less per week in your take home pay.
Now the major provisions that will be enacted:
- Tax rates will rise for income above $450,000 and individuals above $400,000. All income below these thresholds will be taxed at current rates.
- The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else.
- Also extended for five years: The 2009 tax breaks for low-income taxpayers including the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit
- The Alternative Minimum Tax will be "patched," so as to not impact the middle class wage-earners.
- Federal unemployment insurance will be extended for one more year.