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So we've averted the so-called "Fiscal Cliff," but what does that mean for the average family? Here are a few of the highlights of what the passed legislation will mean for you...(from Yahoo! Finance)
It makes most Bush-era tax cuts permanent
The Bush-era income tax rates would be permanently extended for all income up to $400,000 ($450,000 if married). Bush tax cuts that apply to income above those levels would expire. The bill would also preserve the expanded parameters for the American Opportunity Tax Credit, the Child Tax Credit (allowing a $1,000 credit per child) and Earned Income Tax Credit for 5 more years.
It permanently protects the middle class from the AMT
The bill permanently adjusts the income exemption levels for the Alternative Minimum Tax for inflation, preventing close to 30 million middle-class taxpayers from having to pay the so-called wealth tax for 2012.
It caps itemized deductions on high-income households
The bill will limit how much those making $250,000 (married couples making $300,000) may take in itemized deductions.
It retains several expired tax breaks for individuals
A few "temporary" tax breaks for individuals including an option to deduct state and local sales taxes in place of state and local income taxes; and a deduction for elementary and secondary school teachers for certain expenses would be extended for a year or two. The legislation also preserve sthe current estate tax exemption level of $5.12 million but index it to inflation for future years. And it would raise the top rate to 40% from 35% currently.
It extends benefits for the long-term unemployed
2 million Americans would continue receiving federal unemployment benefits for one year.
However, nearly every wage-earner will lose a temporary Social Security payroll tax reduction. The tax reverts back to 6.2% for 2013 and here's what it means for several different annual income levels:
$20,000 to $30,000.....Average tax increase: $297
$30,000 to $40,000.....Average tax increase: $445
$40,000 to $50,000.....Average tax increase: $579
$50,000 to $75,000.....Average tax increase: $822
$75,000 to $100,000.....Average tax increase: $1,206
$100,000 to $200,000....Average tax increase: $1,784
$200,000 to $500,000......Average tax increase: $2,711
$500,000 to $1 million......Average tax increase: $14,812
More than $1 million.....Average tax increase: $170,341
