What's This "Fiscal Cliff" Everyone's Talking About?

. November 29, 2012

For those of us a little confused about federal budget and tax policy, the Tax Foundation recently released a primer on the "fiscal cliff" that lays out all of the tax provisions and budget bills expiring on December 31, 2012. 

The tax changes scheduled to take effect on January 1, 2013 alone are wide-ranging:

·       The 2001 and 2003 tax cuts "Bush tax cuts" are set to expire, which would increase marginal income tax rates, increase the tax on long-term capital gains and qualified dividends, decrease the standard deduction for married couples, and decrease the child tax credit.

·       The estate tax will increase, from 35% on anything above $5.12 million to 55% on anything about $1 million.

·       The alternative minimum tax (AMT) patch is set to expire, resulting in tax increases for taxpayers earning between $50,000 and $200,000.

·       The employee portion of the payroll tax will increase from 4.2% to 6.2%.

·       Several dozen tax deductions will expire, including those for tuition expenses, alternative fuels, and mortgage insurance premiums.