Congress has passed a "fiscal cliff" deal that will temporarily avert severe tax hikes and spending cuts.
The agreement can be considered a victory of sorts for President Barack Obama, who had promised to address the country's severe budget issues by raising taxes on the wealthiest Americans, reports the Chicago Tribune.
But while the tax deal was touted as taxing the richest Americans, the rest of us may also see a higher tax bill in 2013. In fact, it's estimated that 77 percent of Americans will see higher taxes this year under the deal.
So as you read more about the the bill passed by Congress on New Year's Day (available via the Library of Congress' website), you may be interested in knowing just what the "fiscal cliff" deal means for you. Here are some ways you may see your tax bill increase:
- Social Security payroll taxes. Employers and workers typically split the 12.4 percent income tax for Social Security. A worker's responsibility had been reduced from 6.2 percent to 4.2 percent for the past several years. However, that temporary decrease was not extended for 2013, so an individual's responsibility for the Social Security payroll tax will return to 6.2 percent.
- Income tax rates. High-income individuals earning more than $400,000 a year, and married couples earning more than $450,000 a year, will see a new, higher income tax rate of 39.6 percent, up from 35 percent. People earning less than these amounts will not see any changes to their income tax rates.
- Capital gains. The bad news continues for the rich: Those who fall under the new high-income levels will also experience a change in the taxes they pay on dividends and capital gains -- the rates are going up from 15 percent to 20 percent, reports Forbes. Many Democrats had originally sought an increase to 40 percent.
- Estate taxes. Tax rates will rise from 35 percent to 40 percent for estates valued at more than $5 million.
If you have specific questions about how the new fiscal cliff deal affects you, you may want to contact an accountant or tax attorney.
- Fiscal Cliff Deal Will Raise Taxes On 77 Percent Of Americans: Tax Policy Center Analysis (The Huffington Post)
- Tax Law (FindLaw)
- What the Fiscal Cliff Means for Your Taxes (FindLaw's Law and Daily Life)