Jan 06

Another year has begun, and it’s time for a roundup, both to look at my fellow PF blogger’s thoughts on the the fiscal cliff that was just averted. Let’s get to it.

At Consumerism Commentary, Luke Landes (Flexo) wrote Fiscal Cliff Bill Passes: American Taxpayer Relief Act of 2012 (H.R. 8), an excellent summary and discussion of the tax bill that just passed.

At the finance buff, Harry Sit looks at the Fiscal Cliff Deal and Backdoor Roth, a nice new Roth feature I’ll discuss in depth in a future article.

Five Cent Nickel wrote Inside the Fiscal Cliff Deal, with his own highlights of the cliff deal.

But I have to say, the award for Fiscal Cliff blogging goes to my tax crush, Kay Bell, who kept us educated real time with her recent blog posts:

Wow, that’s a lot of Cliff reading, enough that I’ll wait until next week to offer a New Year’s thoughts round up. For now, I’ll just be grateful this crisis has been averted and think about my goals for the year to come. A Healthy Happy New Year to my readers.

written by Joe \\ tags: ,

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.

written by Joe \\ tags: , ,