2013 Fiscal Cliff Solution: What Taxpayers Can Expect Immediately
Just because lawmakers reached a deal on the fiscal cliff doesn't mean you have dodged higher taxes. Here’s look at some of those changes with a local financial professional.
When you get your paycheck next pay period there will be a change that you've never seen before. Your money may be looking kind of low, but don't get upset with your employer.
"Everybody that receives a payroll tax is going to see their social security tax increase," says John Day, the President of Day & Ennis, LLC Fee-Only Financial Planning. That’s just one of the many provisions that were reached in the fiscal cliff deal. "It has a huge number of tax provisions in the bill," he adds.
Another provision of the bill that is going to impact most tax payers is an increase in the
The alternative minimum tax usually referred to as the AMT tax.
"That exemption has been increased from $45,000 to $78,750. That's huge because that would have impacted many millions of people," says Day.
This is a change that is permanent. In years past, congress had to vote on the increase each year.
But in years to come will be different. "Now they are going to begin to index that number to inflation so it will automatically increase every year," he says.
John Day’s financial firm in Macon focuses on financial planning, and he says preparing for the tax changes isn't any different than prepping for any other changes. His says the rules are simple, "Live within your means, people that accumulate money tend to live within their means."
Day is relieved that congress was able to make a compromise on taxes, but says the issues of the nation’s debt and spending cuts are still up in the air for the next two months.
"Another compromise has to be reached so we'll see what happens," adds Day.