How Much Are YOUR Taxes Going Up?
As we get closer to the possible fiscal cliff, people are starting to seriously look at how the currently scheduled tax increases will affect their personal bottom line if Congress does not act. I’ve done some calculations, and I reckon my family’s tax bill will go up by half. If you haven’t started to think about this, now is the time. It is a bit complicated, for many reasons. One, there are changes to numerous aspects of the tax code. Two, tax is calculated on a yearly basis, and you don’t have your 2012 figures yet, so you can only realistically work with your 2011 tax calculations. A lot of things have probably changed since 2011, so those figures aren’t a great place to start your figuring. However, we are going to try to estimate. There is no way this will be absolutely right, because there are too many variables, but some knowledge is better than none.
Gather Your Info
First, you’ll need to know some thing about your family’s tax situation. Check your Leave and Earnings Statement (LES), the 2013 Pay Charts, your 2011 tax return and any other places you need to find out:
- Your 2013 base pay
- number of children
- federal income tax filing status
- whether you itemize deductions or use the standard deduction
Start Doing Some Math
Get a piece of paper, and write the following list on it:
- Increase in Social Security Payroll Tax
- Decrease in Child Tax Credit
- End of 10% Tax Bracket
- Increased Tax Rates
These are the major categories of tax that will increase your overall tax bill.
This includes things such as the expiration of the Higher Education Tuition Deduction, a decrease to the American Opportunity Tax Credit, and many others.
Social Security Payroll Tax
At least this one is easy to calculate! Take your 2013 monthly pay, and multiply it by .02. This is how much additional Social Security-FICA tax will be deducted from your pay each month. Even though it is not calculated as part of your federal income tax return, it is still a tax. Write this number on the appropriate line on your list.
Child Tax Credit
If you have children, you currently receive a generous, refundable tax credit of $1,000 per child each year. If no changes are made, this credit will be reduced to $500 per child for 2013. This means that you will be actually paying that $500 of tax vs. getting a credit for it. That equals $41.67 per month, per child, so take the number of children that you claim and multiply it by $41.67. Put the result on the appropriate line on your list.
Eliminating The 10% Tax Bracket
Under the currently scheduled tax changes, tax rates are scheduled to increase between 2% and 5%, at various levels of income. The most dramatic increase occurs at the lower end of the tax tables, with the elimination of the 10% tax bracket. This means that all taxable income between $0 and $35,350* (single) / $47,350* (head of household) / $70,700* (married filing jointly) will now be taxed at the 15% rate. For most of us, that’s all our income. Eliminating the 10% bracket means the following immediate increase in taxes for people who make more than the figure listed:Source: paycheck-chronicles.military.com