Jan 05

First, a Happy New Year to my readers. 2012 is behind us and so is the talk of the fiscal cliff. Our elected officials knew we had a problem months ago, but like children with a book report due to their teacher, this issue was literally left for the 12th hour to solve. Perhaps even worse than 12th hour, it was resolved on New Year’s Day. Crazy.

That said, let’s take a high level look at how the deal made Tuesday night will impact you:

  • The Payroll Tax (aka FICA) for the employee Social Security withholding was allowed to increase back to 6.2% from the reduced 4.2% we enjoyed these past two years. I dare say for most people, this may be the largest impact, especially those with an income level putting their federal taxes at zero. A 47.6% increase to their withholding.
  • The rates you’ve come to know and love, 10,15,25,28,35% are all still in place, with a new rate for those who make over $400K (single) or $450K (married) 39.6%. This income threshold is above the original $250K Obama was requesting, and happens to be just over the income required to be a top 1%er.
  • The 15% rate for dividends and long term capital gains will continue for all but earners above $200K/$250K (Single/Joint) who will have a 20% rate.
  • The AMT (Alternative minimum tax) which needed to be addressed every year, will have an exemption of $50,600/$78,750 for 2012, and $51,900/$80,750 for 2013. It was agreed these numbers will be automatically adjusted each year for inflation.
  • The ability to choose between a deduction for your state income tax or state sales tax has been made permanent.
  • The child tax credit, scheduled to go down to $500, is now a permanent extended for five more years at $1000.
  • The IRA charitable donation has been extended though the end of 2013. Too bad, they should have made it permanent.
  • The estate tax (aka The Death Tax) has been extended based on the 2012 exemption of $5.12M per person with an inflation adjusted number for 2013 expected soon. Above this amount, and a rate of up to 40% will apply.

The details of H.R. 8, the American Taxpayer Relief Act (ATRA) of 2012, runs a full 157 pages. Over the next few weeks, I’ll expand a bit of some of the provisions worth understanding a bit better. For now, these are the highlights.

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Feb 21

No, I’m not writing about the games, I decided I like the summer games a bit better anyway. But, with less regular TV, I has a great week of blog reading. So, let’s get going….

Trent at The Simple Dollar talked about When Living Cheap Catches Up With You. An interesting discussion of what happens after years of making do, not buying new, and in some cases, not keeping up with repairs. Prioritizing to get back on track.

Clutter is something I think many of of struggle with. I know I have and last July even guest posted about it at Serene Journey. This week I read The Clutter Calculator: What is Clutter Costing You? Tanna Clark hit my hot button, as a numbers guy, by actually listing what each type of clutter source may be costing you, both in time and money. Have a read and let her know if her advice helped you.

Worried about the AMT (alternative minimum tax)? Consumer Boomer will tell you How To Avoid Alternative Minimum Tax. Any ideas that can save me from paying money to the tax man is most welcome.

Christian PF’s Craig Ford asks How Much Can You Afford to Pay For a House? Craig takes a conservative view, and offers reasons to avoid the temptation to stretch to buy the very largest house you can afford. After giving it a bit of thought, I agreed with Craig’s approach for many reasons, and wrote a comment sharing my view.

In Personal Finance By The Book, Joe Plemon asks Should You Leave an Inheritance to Your Children? His article was less to tell you what to do and more to get people thinking about the impact an inheritance can have on your children or grandchildren. One of the topics too many ignore until it’s too late to do anything. Time to think about how you plan to leave your “stuff” when you pass on.

Some time ago I posted Dilbert’s Unified Theory of Everything Financial. It seems that Scott Adams, when he’s not writing about life in an office cubical, has quite the financial head on his shoulders. I was pretty happy to find him posting an article on his blog The Problem With the Economy. Ok, maybe it’s not the only problem, but, hey, it’s a good start.

Have a great week.


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Feb 18

The American Recovery and Reinvestment Act of 2009 contains a number of tax breaks, which seem well intentioned, but none of the details I saw will have less than a token effect on one’s wallet.
A few highlights:
‘Making Work Pay’ Tax Credit. – For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families (with incomes up to $150,000).
‘American Opportunity’ Education Tax Credit. – For 2009 and 2010, the bill would provide taxpayers with a new ‘American Opportunity’ tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year.
Computers as Qualified Education Expenses in 529 Education Plans. – The bill provides that computers and computer technology qualify as qualified education expenses.
Sales Tax Deduction for Vehicle Purchases. – The bill provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009.
Temporary Suspension of Taxation of Unemployment Benefits. – The proposal temporarily suspends federal income tax on the first $2,400 of unemployment benefits per recipient.
Extension of AMT Relief for 2009. – The bill would provide more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals.

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Oct 09

Today I caught a bit of CNBC, in which there was a brief discussion of the AMT. The AMT (Alternative Minimum Tax) was put in place to be sure that the wealthy were not able to gather so many deductions and tax loopholes that they could avoid paying taxes on all their income. Good idea in theory, but in practice the AMT amount was never adjusted for inflation and is now hitting people it was never intended to. People who live in a state with high taxes are now finding that their Real Estate taxes and/or State Income Tax are no longer deductible, but wiped out by the AMT.

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