Watch Your Check: How the Fiscal Cliff Affects You
After a lot of hubbub over the fiscal cliff, Congress finally passed a tax package on New Year’s Eve that cause a change in your paycheck. Most Americans won’t see a rise in income taxes, thank goodness, but about 77 percent of households will be face higher taxes this year. This is the result of hikes in Social Security payroll taxes. Tuesday’s new tax package didn’t continue the temporary payroll tax cut from 2011 and 2012, meaning a worker with a $50,000 salary will take home about $500 less over the course of this year.
Those earning the most will be hit hardest. The new tax package will protect 99 percent of middle-class workers and small-business owners. Single people earning more than $400,000 a year and couples earning more than $425,000 can expect to see a 1.6 percent increase in their income taxes. Investment taxes will increased for those with investments that fall at the top of the new tax bracketing system. High-income individuals and couples can expect to pay more taxes for Obama’s universal healthcare policies.
For families on the more modest side of the income equation, there will be less to go around as well. Households with an income of between $40,000 and $50,000 can anticipate to have $523 less to bring home on average. If your family as about $50,000 and $75,000 yearly, expect to have about $800 less each year. These reductions are the result of the payroll tax; you’ll still see 12.4 percent come out of your check for Social Security. Many of former President Bush’s tax legislation which was originally set to expire at the end of 2012, will be extended, like the $1,000-per-child tax credit. Individuals making less than $400,000 and couples making less than $425,000 will receive the same tax cuts they received under Bush.
It’s the first Friday of 2013 and a lot of people are getting their first paycheck of the year. How do you think the changes will affect your family’s budget?