Sunday, January 13, 2013

How new tax rates will affect you in 2013


In passing the American Taxpayer Relief Act of 2012 and averting the dreaded "fiscal cliff," Congress ensured that workers will pay more in payroll taxes and that some folks will pay more income taxes.

The good news is that many of the new tax rules are permanent, which will give individuals and business owners a welcome sense of stability. Also, these changes were better than the higher income taxes that would have burdened just about all taxpayers had the tax cuts been allowed to simply expire without further action.

Here is a summary of the new tax rules that have been made permanent by the new law:

Tax rates on ordinary taxable income. For workers with taxable income below certain levels, their tax rates will remain at 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent. For single filers with taxable income above $400,000, married filers with income over $450,000, married filing separately over $225,000 and heads of household with taxable income over $425,000, the new 39.6 percent rate will replace the 35 percent tax rate for income over these amounts. So a married couple with a taxable income of $650,000 will pay an additional $9,200 of income tax just due to this change.

Higher tax rates for long-term capital gains and dividend income. Like the income tax rates for people with incomes below certain levels, the tax rates that apply to their capital gains and dividends will remain the same. But for taxpayers with the higher incomes noted above, their rate increases from 15 percent to 20 percent. So a taxpayer with $10,000 in capital gains and $10,000 in dividend income would pay an additional $1,000 of income tax due to this change. Read more....

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  3. If you had the choice between taking out $40,000.00 of your inherited cash which is part of a larger IRA to pay off debts (but did not have to sell stocks to get that $ & your tax bracket is $15% but perhaps less since I am on SSD & earn less than 14,000.00 a year) or take out a 9% re-fill on a 2nd home, which is being rented for $1000.00 a month that will be sold in 3 years with a contract)- is it as simple as comparing interest rates to decide that a 9% re-fill is a better deal than a 15% deal? ( the 9% is non-negotiable as I can only get a "no doc/no asset loan" at that 2013 tax bracketsunfortunately)or are there other matters to consider.

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  5. Your figures are in error. The taxes for both Clinton and Bush were calculated using the maximum rate for that selected income. For instance the Clinton 1999 tax rate on 30K was 28%, which is what they used to get the 8400 figure. However taxes are not calculated that way. The first 25K of income would have been 2013 tax brackets at the lower 15% bracket first, thus yielding a much lower figure than what you show.I am not arguing that Bush doesn't have lower taxes. He certainly does. Of course he obtained his lower tax brackets by using deficit spending and increasing the national debt. Add back in the interest payments we'll be making and I bet Bush actually cost taxpayers far more than Clinton ever did.

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