Posted by Frugal on 1st January 2013
The tax deal has been reached in both Senate and the House. There were very little spending cut, and some tax increases for the people earns the highest income above $400K. Here is the summary on the tax changes:
1. 2% social security tax cut is reverted. This affects everyone who has an income. You will see payroll tax increases (or rather reverted back) by 2%.
2. The Bush tax cuts expire for income higher than $400K on individual filing, and $450K for filing jointly. Marginal bracket rises back to 39.6% from 35%. Most people including me get to keep the same brackets from Bush tax cut.
3. AMT (alternative minimum tax) exemption amount is now $78750. Without the fix, it would have been reverted back to $45000 which has never been indexed to inflation. Going forward, this exemption amount will be indexed to inflation. With this change, some tens of millions of US households won’t be hit by AMT. Because it’s indexed to inflation now, it would reduce my federal tax by a couple of hundred dollars (while paying $2000 more in social security tax).
Essentially, there has been no changes, except the 2% social security tax reversion for everyone. The additional 3.8% medicare tax on capital gain will only apply to income higher than $400K/$450K for single/joint filing I believe.
For more details, you can follow this link for original text.
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