What the End of the Bush Tax Cuts Means for You—Part One
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
I hope you enjoyed all the presidential debates last month—and I also hope that you are are happy with the election results. Perhaps now our elected officials can get back to work.
In today’s political climate, it can be difficult for taxpayers to do tax planning. How can we determine how to handle open enrollment on our flexible spending accounts, whether or not we want to get married, or any number of other possible tax circumstances?
Let’s look at some changes to expect in 2013 if Congress doesn’t pass some extender laws really quickly. (Note: These projected numbers are approximate.)
Special capital gains and qualified dividend income rates of 0 percent and 15 percent will expire. In 2013, expect to pay up to 20 percent for capital gains and up to 39.6 percent on dividends.
The marriage penalty will return. The standard deduction for couples will drop from twice that of singles ($11,800) to about 84 percent of that—under $10,000. In other words, where singles’ tax rates rise to 15 percent at about $35,000, they will rise to 15 percent at about $59,000 for couples instead of at $70,000.
The adoption expense credit will drop. The 2013 credit is projected to be $5,000 ($6,000 for a special needs child), while the 2012 credit is $12,650.
Medical expenses are presently reduced by 7.5 percent of your adjusted gross income. In 2013 that rises to 10 percent.
The allowance of up to $250 for educator expenses as an above-the-line deduction will end. The impact of this is minimal on an individual basis—it only saves the average educator between $38 and $63.
The sales tax deduction will stop being an option instead of the state income tax deduction. For taxpayers living in states without an income tax, this can have a significant impact.
The nonbusiness energy property credit will change in value. This credit was created to reduce energy waste by encouraging the installation of insulation, roofing, and similar things. It has been bouncing around in value—from 10 percent of the costs to a lifetime credit of $500 in 2011. In 2013, it will be gone.
Additionally, there will be other increases to personal taxes, including alternative minimum taxes.
To find out about how these changes may impact you, check out the Tax Foundation’s Tax Burden Calculator. It compares three tax scenarios: the elimination of the Bush tax cuts, President Obama’s proposals, and the Republican plan to extend some of the Bush tax cuts. When I tried it, my federal tax burden was the same under the President’s plan and the Republican plan. But the elimination of the Bush tax cuts increased my joint taxes by nearly $3,000. How did you do?
Come back next week to look at how the expiration of the Bush tax cuts will affect small business—and by that, I mean, your Schedule C business or your small partnership or corporation.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.