With all of the hype surrounding the “fiscal cliff” negotiations in the last couple of weeks, most would have thought big changes were coming to the tax law. The reality—while there were some substantial changes, on the surface not a lot has changed for a majority of taxpayers. In fact, some of the bigger changes to take effect in 2013 were not even a part of the fiscal deal negotiations—the 0.9 and 3.8% medicare surtaxes were slated to take effect regardless.
One of the most immediate and noticeable changes will be the expiration of the 2% reduction in payroll taxes for employees. For the past two years, employees have seen a 2% boost in their paychecks. However, starting in 2013 employers will again be required to withhold 6.2% from employee’s total wages–as opposed to the 4.2%, resulting in smaller paychecks for employees.
Taxpayers having income under $400,000-450,000 will continue to have preferential capital gains rates of 0% or 15%. Taxpayers with incomes above these thresholds will see an increase on dividends and capital gains to 20%.
Elementary and secondary educators will continue to be able to deduct $250 of eligible expenses on their return without having to itemize.
If you’ve regularly been subject to Alternative Minimum Tax (AMT) in the past, you may still be subject to it. If you haven’t or have never heard of it, you probably won’t have to worry about it this year.
The American Opportunity Credit which gives taxpayers a maximum credit of $2,500 for qualified tuition expenses will still be available–along with the Earned Income Credit and Child Tax Credit.
For a more in-depth review of the provisions in the bill see Journal of Accountancy