Sunday, January 6, 2013
Wall Street Journal Tax Report: How Much Will Your Taxes Jump?, by Laura Saunders:
In the nick of time, and amid much political drama, Congress passed the American Taxpayer Relief Act on New Year's Day—averting massive tax increases for nearly all earners that were slated to take effect Jan. 1.
Even so, millions of people soon will feel something less than relief from the new law.
While the top 1% of taxpayers will bear the biggest burden, many other families, affluent and poor, will pay more as well.The most immediate change affects nearly all workers: Congress allowed a two-percentage-point cut for the employee portion of the Social Security tax to expire. As a result, each will owe up to $2,425 more in payroll tax this year than in 2012.
Beyond that, the new law's effects will be highly individualized—and in some cases highly painful. ... In essence, the new law "replaces uncertainty with confusion," says David Lifson, an accountant at Crowe Horwath in New York. "Only tax wizards can understand the entirety, especially for people earning between $200,000 and $450,000." ...
To help you get a grasp of your own 2013 taxes, the Tax Policy Center, a nonpartisan group in Washington, has devised a calculator, available on its website that can help you crunch the numbers.
- Single Unemployed Person (Income: Under $10,000): Average tax rate: 6.9%; average federal tax change: Up $63 (20.9%)
- College Student (Income: $10,000-$20,000): Average tax rate: 6.4%; average federal tax change: Up $123 (14.7%)
- Lower-Income Working Couple (Income: $20,000-$30,000): Average tax rate: 1.3%; average federal tax change: Up $279 (446%)
- Retiree Household (Income: $30,000-$40,000): Average tax rate: 4.0%; average federal tax change: Up $69 (5.1%)
- Higher-Income Professional (Income: $150,000): Average tax rate: 22.0%; average federal tax change: Up $1,784 (6.5%)
- High-Income Couple (Income: $350,000): Average tax rate: 25.6%; average federal tax change: Up $2,699 (3.9%)
- Very High Income Household (Income: more than $1 million): Average tax rate: 38.5%; average federal tax change: Up $170,341 (15.5%)