The so called “Fiscal Cliff” has been averted, at least for the moment. As a result, there are NO changes to your Federal taxes, UNLESS your income EXCEEDS $450,000 if you are married, or $400,000 if you are unmarried. This means the Bush Tax Cuts which we have had for the last 10 years remain in effect for you.
If however, if your income is either at the $400,000, or $450,000 level depending on your marital status, your taxes revert to the tax plan in place before the Bush Tax cuts.
Information provided below covers some Personal Federal Tax changes related to the Fiscal Cliff legislation, and some changes which were already scheduled, or were not part of the Fiscal Cliff legislation.
Please remember that the Fiscal Cliff tax bill requires the creation of very specific tax regulations, and that at this point, only very general information is available. As the negotiations continue through March, to determine the spending cuts and debt ceiling, changes are always possible.
We will keep you posted through our Web Site, WWW.CPAACCTAX.COM, and our Blog accessible from our Web Site.
SOCIAL SECURITY / MEDICARE:
- The 2013 Social Security Wage Base is scheduled to increase to $113,700, an increase of $3,600 from the 2012 wage base of $110,100. The Medicare tax remains at 1.45% tax with no limitation on income subject to the tax.
- In 2013 wages subject to the Medicare tax, which exceed $200,000, will be taxed an extra 0.9% as part of the ObamaCare Health Care legislation. (Note that this tax applies only to the employee, and does not impact the employer matching Medicare tax).
- We are sorry to report that as of January 1, 2013, the Social Security tax for employees will increase to 6.2% from 4.2%. (The employer side has been and will remain 6.2 %.)
FEDERAL INCOME TAXES:
- As part of the Obama Care legislation, beginning in 2013, there is an additional 3.8% tax on investment income, which exceeds $250,000 for married couples or $200,000 for non married couples.
- As part of the Fiscal Cliff legislation, if your income as discussed above is $450,000, or $400,000, your top tax rate rises from 35% to 39.6%. Capital Gains tax rates will rise from 15% to 20%. Your Schedule A deductions will become subject to limitations once again. We will outline these pre Bush Tax Cuts in more detail in the next few weeks.