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How the fiscal cliff deal affects your taxes

7:27 PM, Jan 2, 2013   |    comments
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(NEWS CENTER) -- The headline coming out of the fiscal cliff deal in Congress was that income taxes were only going up for individuals making $400,000 a year and couples making $450,000, but there are other pieces of the deal that affect lower income earners, too.

Anyone with a paycheck will see Social Security taxes rise from 4.2% to 6.2%, which was the rate before 2011.  A person making $50,000 a year will take home $1,000 less in 2013.

Long term capital gains and dividend rates will rise to 20% from 15% for individuals making more than $400,000/year and couples making more than $450,00/year.

Taxpayers with ordinary tax rates below 25% will pay 0% tax on long term gains and dividends. Those who make less than $400,000/year with ordinary tax rates above 25% will pay 15% on long term gains and dividends.

The bill makes permanent exemptions to the Alternative Minimum Tax, indexed for inflation.  The exemption is set at $50,600 for individuals and $78,750 for couples filing jointly.

Personal exemptions and itemized deductions will be subject to a phase out for individuals making more than $250,000/year and couples making more than $300,000.

The exemption for estate taxes and gift taxes stays at $5 million. But the rate on estates and gifts over $5 million rises from 35% to 40%.

NEWS CENTER

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