Fiscal cliff refers to a number of tax increases and spending cut that will take effect on 1 January 2013. If Congress and President Obama will not agree to act during this perfect storm to avoid financial disaster, the United States was, as was coined term, "falling off the cliff." Tax increases to One will be more significant than the latter half century.According a recent report by the Congressional Budget Office (CBO) fiscal cliff (by taking billions of dollars out of the economy) will push the U.S. into recession next years and raise the unemployment rate to 9.1% by the end of 2013. In addition, the CBO said economic output will fall by about one-half of one percent in 2013 if Congress fails to act to reverse the tax increases and spending cut put in motion by the previous deals deficit. It came into force in January and integrated 7000000000000 USD worth of tax increases and spending cut over a decade. In addition, the debt ceiling - a legal limit on the federal government borrowing - will have to be raised at the beginning of next year from its current level of $ 16.394 trillion.So what tax increases and spending cut Lets establish the exact fiscal cliff? look.
Automatic spending cutsSince Congress last year failed to reach a debt deal, Budget Control Act provides for the automatic spending cut starts January 2, 2013 which will reach $ 1.2 trillion in deficit reduction over 10 years. Frankly, that only amounts to about $ 120 billion per year which is a decrease bucket.Defense deficit spending is cut about $ 55 billion in 2013, which means at least a 10% cut for each program, project and activities that are not explicitly exempt.Another $ 55000000000 will be deducted from the expected level of nondefense spending, which would include things such as education, food inspection and safety of air travel. That amounts to about an 8% cut to programs, projects and activities.
The current tax rates cuts The Bush we enjoyed in the past ten years is set to expire December 31 as follows: rate / income tax brackets: Up to 15%. 28%, 31%, 36% and 39.6%, up from 10%, 15%, 25%, 28%, 33% and 35% capital gains rate: The increase to 20% from 15% for most filers.Qualified dividend rate: Rises to judge a person on income tax, up from 15% for most filers.Increased itemized deduction limitation: high-income taxpayers may not be able to take some itemized deduction and personal exemption tax credit full.Child:Falls to $ 500 per child of $ 1,000. Also partially restored reduced.American Opportunity Tax Credit: This credit expired. The smaller the expectation value tax credit for college tuition is restored. Some little education tax benefits also expire.
Earned Income Tax Credit: expanded eligibility for credit penalty relief expires.Marriage:This means that the low or middle income earner married two owe more on IRS than they could if they were single making the same income taxes. Estate tax credit and the level of real exception back to the previous level. Exemption levels dropped over $ 1,000,000 from $ 5,000,000, and the maximum tax rate on taxable property increased to 55%, up from 35% holidayThe Payroll taxes Social Security tax rate of 6.2% moving, up from 4.2%, the first $ 110,100. wages. Effectively, a person making $ 50,000 would pay $ 1,000 Payroll taxes next year. Given the insolvency of the social security system as a whole, this is a very misguided provisions in the first federal extension benefits place.Unemployment extensionThe benefits ended. For workers who lose their jobs after July 1 2012, just 26 weeks of benefit payments available, down from 99 weeks of benefits that have been available. This means that an estimated 2,000,000 claimants will lose their benefits by January.
AMT patchThe Alternative Minimum Tax threshold fell to $ 33,750 for individuals and $ 45,000 for married couples. That was down from $ 50,600 and $ 78,750, respectively, if the exemption amount is adjusted for inflation. As a result, more than 30 million more people are now affected by the tax, up from 4,000,000 in date.OtherAs part of Obamacare, which is now the law of the country, some new additional taxes are added on top of tax increases above.A of.9% additional tax will apply to wages or earned income over $ 200,000 ($ 250,000 if married). This is the top 1.45% of all Medicare currently owe wages.
An additional 3.8% Medicare supplement also apply to investment income for taxpayers achieving more than $ 250,000. What do nowTax, property and financial planning is the key now. A thorough analysis of tax and financial situation should bear to determine whether it makes sense to sell long-term investment capital gains and pay tax at 15%, rather than 20% or more after the initial diagnosis year.
A The Company's portfolio should also be conducted to determine the likelihood of any adverse exposure pressure selling stock to pay dividends or funds. Also, the favorability of new municipal bonds should be considered, given the higher tax rate is above us, not to mention the additional 3.8% Medicare tax on investment income of high earners under Obamacare.Accelerating Any ordinary income 2013-2012 strategy also may, depending on individual circumstances.Finally, for anyone with assets exposed to new limits property tax (currently $ 5,000,000 per person, down to 1,000,000 per person ) an immediate review of wills, trusts and estate planning options could save millions of deaths taxes.