Here are some changes that could affect you in 2013 if Congress does not renew various tax cuts of recent years:
• The Social Security tax will rise to its traditional rate of 6.2 percent of covered income from the current 4.2 percent level.
• The 10 percent income tax rate will be eliminated so that filers in that bracket this year will pay 15 percent in 2013; those with income in the 25 percent bracket will pay 28 percent on that money; the 28 percent bracket will rise to 31 percent; the 33 percent bracket will go to 36 percent, with the highest rate, now 35 percent, going up to 39.6 percent. The IRS has not yet disclosed the income levels that will correspond to these tax brackets.
• The maximum federal rate on most long-term capital gains will increase to 20 percent in 2013, up from 15 percent this year. The biggest change will involve qualified dividends. If the tax cuts are not extended, these dividends will be considered ordinary income and taxed as high as 39.6 percent.
• More taxpayers will have to pay the Alternative Minimum Tax. Dating to 1969, this tax was meant to apply to higher earners who used shelters and other means to avoid taxes. Special income exemption measures in recent years have saved millions of people from this tax. If lawmakers don't act, the exemption amounts will drop dramatically, subjecting more people to the tax.
• The deductions for married couples will fall. Why? Because the Bush-era tax cuts raised the deduction to address the so-called marriage penalty that had many couples filing jointly paying more than if they filed as single.
• Some measures that limit tax savings through itemized deductions and personal exemptions will return for higher-income people.
• College tuition breaks will be less generous. The American Opportunity Tax Credit, set to expire at the end of this year, allowed families to take a credit of up to $2,500 in related expenses. If the AOTC expires, the Hope Education credit will take its place and limit the credit to $1,800. The Hope credit also only applies for two years of college while the ATOC has provided four years of credit.
http://www.aarp.org/money/taxes/info-11-2012/new-taxes-in-2013.2.htmlHold up -- I thought the increase in taxes would only affect millionaires and billionaires?? I am neither but it sure looks like this list affects me.
