We Avoided the Fiscal Cliff!... Now What?
We all safely made it past the end of 2012 without falling off the fiscal cliff. So, many are asking, what exactly happened? And what sort of deal was made to avoid that ominous cliff? Here are just a few of the tax-related points that found their way into the deal and that may affect you and the taxes you pay:
The number one point is that the payroll tax did go up, as expected. There never seemed to be any doubt that it would. Wage earners are now contributing another 2% of each paycheck via the social security tax. This has already gone into effect and you have probably noticed a difference in your 2013 paychecks.
Another point that won't affect as many taxpayers is that the estate tax exemption remains at $5 million (plus even a little more for inflation). The estate tax rate, however, did increase from 35% to 40%, but keep in mind that only affects estates worth over $5 million.
Finally, the limits on the tax brackets were adjusted upward from the 2012 limits. That's not out of the ordinary, but this deal even created a new tax bracket. The tax tables reflecting the changes can be seen on the IRS website. Remember, though, the new rates are for 2013. The taxes we are all preparing to file in April are the 2012 returns, so we still have some time before we feel the effects of this part of the deal.
As I said, these are just a few of the points of the deal that was made - there is much more to explore if you have the time. Happy 2013 everyone!
The number one point is that the payroll tax did go up, as expected. There never seemed to be any doubt that it would. Wage earners are now contributing another 2% of each paycheck via the social security tax. This has already gone into effect and you have probably noticed a difference in your 2013 paychecks.
Another point that won't affect as many taxpayers is that the estate tax exemption remains at $5 million (plus even a little more for inflation). The estate tax rate, however, did increase from 35% to 40%, but keep in mind that only affects estates worth over $5 million.
Finally, the limits on the tax brackets were adjusted upward from the 2012 limits. That's not out of the ordinary, but this deal even created a new tax bracket. The tax tables reflecting the changes can be seen on the IRS website. Remember, though, the new rates are for 2013. The taxes we are all preparing to file in April are the 2012 returns, so we still have some time before we feel the effects of this part of the deal.
As I said, these are just a few of the points of the deal that was made - there is much more to explore if you have the time. Happy 2013 everyone!
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