Thursday, December 20, 2012

The Fiscal Cliff and Tax Returns

 Thanks for visiting my blog, Tax Charm.   I will blog  about the latest tax issues for the 2012 tax year, tax recommendations and I will  personally answer your tax questions.

Today, I will discuss the effects of "The Fiscal Cliff" on the average American 2012 taxpayer, or at least what I consider to be  average.  Many of you have at least heard of the "The Fiscal Cliff."  You may heard about it on CNN, on MSN.com , or simply  read one of your Facebook or twitter friends statuses.
 
If you do not know what "The Fiscal Cliff" is or the possible effect of it on our country , I advise you to do your research!  Political debates and issues affect every single one of us.  I will go over what is meant by the fiscal cliff and its implications on tax returns. However, the fiscal cliff affects a lot more than tax returns.  Since I am not an economist or  an expert on the fiscal cliff, I'll just stick with what I do know and that is income taxes.

For starters, "The Fiscal Cliff" ( a term coined by Bernanke)  refers to the economic effects that could result from tax increases, spending cuts, and a reduction in the U.S. budget deficit.

Next, I  go over what it could mean for our tax returns if the President, Congress and policy makers do not come to an agreement .

Some  tax cuts are scheduled to expire  at the end of 2012 and will expire if the Congress does not extend them.

  • Payroll tax cut expires (payroll taxes go from 4.2% to 6.2%; your taxes go up 2%). Smaller payroll checks for all.
  • Income tax brackets all increase (10% to 15%, 25% to 28%, 28% to 31%, 33% to 36%, 35% to 39.6%)
  • American Opportunity Credit of $2500 for college tuition costs set to expire
  • Child tax credit reduced to $500 (from $1000)
  • Capital gains tax increases from 15% to 20%
  • Dividend tax rate will greatly increase from 15% to 39.6%!
  • Tax refunds will be delayed

  • Above is not an all inclusive list of possible tax return effects, there are other tax increases and credits that may expire or be changed that are not in my list. Please continue to do your own research.

    No one knows for sure what will actually happen. Everything is up in the air as our policy makers make last minute decisions after procrastination. They seem to wait until the absolute end of the year every tax year.

    I like to keep people informed. On a more positive note, I will like to wish you all a

    Merry Christmas and a Happy New Year!

      Check out the following articles for more information on the "The Fiscal Cliff"

    What is the Fiscal Cliff
    Fiscal Cliff Impasse "Can a Deal still get done?" cnbc
    www.cnn.com/2012/12/19/politics/fiscal-cliff/index.html



    Disclaimers: 

    Tax Charm blog is not legal or professional advice.

    You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

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