If tax cuts were extended, why is my paycheck smaller?
Ok, on 1.1.13, to avoid the fiscal cliff, extend tax breaks, and postpone mandatory across-the-board spending cuts known as sequestration the house and senate both passed the <strong>American Tax Relief Act of 2012.</strong>
President Obama signed it on 1.2.13.
<strong>FAQ:</strong> OK, What does that mean to me and my hard earned money?
<strong>A:</strong>It means permanent extension of the Bush-era tax cuts for most taxpayers<strong>***</strong>, permanent/patch relief from the alternative minimum tax (AMT) for individuals, and a bunch of retroactively resuscitated and extended tax breaks for individual and businesses.
It also revives the research and experimentation credit and the American Opportunity Tax Credit and provides for a maximum estate tax rate of 40 percent with a $5 million exclusion.
<strong>***</strong> However, for the shot caller$ out there, both income (including dividend income) and capital gains tax rates will go up for individuals with income over $400,000 and families earning more than $450,000. Oh and if you make over $200,000 (single)/ 250,000 (household) you also have an additional .9% medicare tax.
<strong>FAQ:</strong> Whoa, slow down. I asked what the ATRA meant to ME? Last time I checked, I made less that 200 grand, so why was my last paycheck smaller?
<strong>A:</strong> Unfortunately, the new law did NOT extend payroll tax cuts that had lowered the Social Security withholding It is back up to 6.2% instead of 4.2% being taken out of your paycheck.
<strong>FAQ:</strong> Wait, so did Obama raise Social Security taxes for the middle class?
<strong>A:</strong> No, he began the 2% payroll tax break in 2011.