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What To Expect In 2013 And Beyond In Relation To Your Taxes

Posted on 28, Jan, 2013


While the rest of the world was enjoying New Years Eve, and of course the complete and total absence of the Mayan Apocalypse, the US Congress was busy trying to put together a financial deal which would save the United States from potential financial ruin. The much touted "Fiscal Cliff" had been spoken about for a quite a long time and despite the fact that many people thought going over this "cliff" was a good idea Congress didn't seem to agree.

So what has changed for America as a result of this financial deal? In short on January 1st 2013 taxpayers in America woke up to 13 tax increases to get the new year off to a... new start. There's no way anyone can describe these tax increases as being good news but in the minds of the Republicans and the Democrats this is the only way to keep America functioning as it is right now.

Let's take a look at the tax increases which are most likely to affect “Mom and Pop” business in America over the next few months.

Payroll Tax

This took a massive jump from 4.2% to 6.2% for every salaried worker in the country. What this effectively means is that the average American household can expect to have anywhere from $500 to $1,000 less coming in this year, which obviously isn't going to be welcome news in any home.

Investment Taxes

If you work with a good financial advisor he probably advised you to make the most of your year-end investment tax breaks and to cash in where you could before the start of 2013. The reason why you were being advised to do this is because the tax on capital gains and dividends now stands at 20% for people with incomes over $450,000, an increase of 5% from the previous rate of 15%. If you're earning more than $250,000 per year, then this rate increases from 15% by an additional 3.8% instead.

Death Tax

Hopefully the "Death" tax isn't something you'll need to worry about for many years to come but either way from 2013 onwards this tax has now been raised from 35% to 40% instead. In reality this could have been a lot worse in terms of how the government deals with taxing the deceased.

For all the tax increases which were made Congress did leave certain deductions well and truly alone - prime examples of that are the $1,000 Child tax Credit, American Opportunity Tax Credit and the Earned Income Tax Credit. These will all continue their financial existence into the year 2017 and perhaps beyond.

What this means is that tax codes are going to have to be updated and the IRS are frantically working to update their software as we speak. In the eyes of the Obama administration they feel that these tax increases won't be felt by "...98% of Americans" but the payroll tax alone will be something felt quite sharply by every family in America which is relying on a certain amount of cash coming in every single week or month.

Is this the end of the "Fiscal Cliff" drama? Only time can tell ladies and gentlemen but for now, at least, this appears to be the end of the matter.

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