Many last-minute filers are getting ready to finish up their tax returns for 2013. Whether you filed your taxes months ago or are just getting around to finishing your return, millions of Americans saw their 2013 tax bills go up.
The fiscal-cliff deal that Congress hammered out at the beginning of 2013 seems like ancient history, but it’s only now having an impact on the tax returns that are due this Tuesday. The deal prevented what could have been a much more extensive rise in taxes for every taxpayer in the nation. Although the compromise extended many of the tax cuts that had been slated to expire, it still allowed rates to rise in a number of critical areas.
Higher payroll taxes
Under the deal, nearly every wage-earner saw a rise in the taxes that are taken directly out of workers’ paychecks. The law allowed the payroll tax cut that had been available since 2011 to expire, and so workers started having an extra 2% of their paychecks go toward Social Security taxes as of the beginning of last year.
For a typical household, the tax-rate rise amounted to about $1,000 in extra taxes. With the maximum Social Security wage base of $113,700 for 2013, however, the higher payroll taxes cost some joint-filing couples as much as $4,548.
Higher taxes for high-income taxpayers
Lawmakers agreed to impose higher marginal tax rates for high-income earners, with the key income levels being $400,000 for single filers and $450,000 for joint returns. Above those levels, the current 35% rate went back to its previous level of 39.6%.
On the investing front, the maximum tax rates on dividends and capital gains rose to 20%. However, those under the $400,000 or $450,000 limits continued to pay a maximum of just 15%, while previously existing 0% rates for those in the 10% and 15% ordinary income-tax brackets were extended.
July 17, 2014 //
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