What the fiscal cliff tax law means to you
SUNTIMES STAFF, WIRES January 2, 2013 6:14PM
Updated: January 2, 2013 9:15PM
Social Security payroll tax: Everyone pays more. The payroll tax will return to 6.2 percent from 4.2 percent where it has been since 2010 — costing the average worker about $1,000 a year. This is a tax cut that Illinois residents barely noticed. Shortly after it took effect, the state raised the income tax rate 2 percentage points.
Decade-old income tax cuts stay in effect on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
Capital gains taxes and taxes on dividend income would increase to 20 percent from 15 percent for those with income exceeding the $400,000 level, $450,000 for families.
The alternative minimum tax will be permanently indexed to inflation, preventing nearly 30 million middle- and upper-middle-income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
Various tax credits are extended for five years, including the the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
Extends jobless benefits for the long-term unemployed for one year.