Certainly, the most obvious change will be the reinstatement of full payroll taxes. Your social security taxes from your paycheck will go from 4.2% back to their original 6.2%.
However, the single biggest contributor to the “cliff” is the expiration of the Bush Tax Cuts. If the Bush tax cuts expire as scheduled, in January…
…Income taxes rise. The Lowest bracket goes from 10% to 15%, and the highest bracket goes from 35% to 39.6%
…Capital Gains taxe rates rise from 15% to 20%
…Dividend rates rise from 15% to whatever your new, higher, tax rate will be
…The child tax credit reduces from $1000 to $500
…College tuition credits will reduce, with the expiration of the American Opportunity Tax Credit
…The Marriage Penalty returns, and married couples will owe more than if they were single.
…Estate Taxes return with a vengenace, with the exemption level falling from $5 million to $1 million, and top rates going up 20% to 55%.
As if that isn’t enough, there’s more! The Alternate Minimum Tax (AMT) patch expires, subjecting another 26 million middle class earners to the tax. A 3.8% surtax on investment Income is guaranteed, affecting mostly high-net-worth individuals.
So, its going to affect everyone you know – keep an eye on this.