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How Much Will Your Taxes Jump?

In the nick of time, and amid much political drama, Congress passed the American Taxpayer Relief Act on New Year’s Day—averting massive tax increases for nearly all earners that were slated to take effect Jan. 1.

Even so, millions of people soon will feel something less than relief from the new law.

Tim Foley

The bill approved in Congress to avert the fiscal cliff would bring the first major tax increase on high earners in 20 years. Laura Saunders breaks down how new tax increases will impact across different tax brackets. Photo: AP.While the top 1% of taxpayers will bear the biggest burden, many other families, affluent and poor, will pay more as well.The most immediate change affects nearly all workers: Congress allowed a two-percentage-point cut for the employee portion of the Social Security tax to expire. As a result, each will owe up to $2,425 more in payroll tax this year than in 2012.Beyond that, the new law’s effects will be highly individualized—and in some cases highly painful.”Many affluent people in exactly the same financial position as last year will see a substantial tax increase,” says David Kautter, a director of the Kogod Tax Center at American University.

Back-Door Tax Increases
At first glance the law appears simple. In terms of income tax, for example, only the highest tax rate in 2012—the 35% bracket—will increase in 2013, to 39.6%. And that applies only to individuals with at least $400,000 of taxable income or couples with at least $450,000.  Read More
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Posted on January 6, 2013, in #business news and tagged , , , , , . Bookmark the permalink. Leave a comment.

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