Thursday, November 8, 2012

Why your taxes will likely increase in 2013

So this is a pretty popular topic in the tax world. I wanted to touch on how taxes will impact my close friends and family.

If Obama (I would be saying Romney here if he was elected) and Congress can't get something together, there are a few tax cuts that will expire.

-Payroll Tax - that amount taken out of your paycheck is currently 4.2%, it will be raised to 6.2%
Impact: All working taxpayers

-Tax Rates - the rates for ALL Americans (not JUST the rich, not JUST the middle class) will increase ranging from 3-5% across the board. (see the table below)
Impact: All taxpayers

-Standard Deduction for Married filing jointly will not be as beneficial.
Impact: Married taxpayers

-Married filing jointly 15% bracket will shrink (forcing many into a higher tax bracket)
Impact: Married taxpayers

-Child tax credit maximum will revert to $500 (currently $1000).
Impact: Lower income taxpayers with children

-Medical expenses will be more difficult to deduct (7.5% floor reverts to 10% floor)
Impact: taxpayers with crazy medical bills

Dependent care expenses - the maximum credit will decrease (from 3,000&6,000 to 2,400&4,800), as well as the portion of expenses counted as a deduction (35% percent to 30% of total dependent care expenses).
Impact: Lower income taxpayers with children

Earned Income Tax Credit (EITC) - Less Americans will be qualified for the credit due to more stringent requirements.
Impact: Taxpayers 25 years of age, lower income, working

Education Credits Expire - time to finish school, because the american opportunity tax credit will expire. This is the credit my student friends are getting (up to $2500) to subsidize our tuition. If you are a student, your tax return is likely to not look so nice when you file in april 2014.
Impact: All students (or parents with dependent students)

2013 Tax Rates:

Tax Brackets (2012 Dollar Amounts)Marginal Rate
Unmarried FilersMarried Joint Filers  
OverBut Not OverOverBut Not Over20122013

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