It may seem that the wealthy will be the only one facing tax hikes in 2013 after Congress reached a deal preventing tax rates from reverting back to Clinton-era levels for those making less than $450,000, but that’s not the case. Every working American will be paying more.
That’s because legislators did not extend a tax holiday. For the past year and a half we saw a tax break from what’s called Social Security Payroll Tax.
But now that tax cut has expired, meaning the break is over and the tax is going back to normal. It was part of an economic stimulus in 2011 and was extended into 2012. This time, the tax cut was not extended; instead legislators let it expire.
Now every worker in America will pay 2 percent more in federal taxes, which adds up to less in your paycheck.
“Most people live paycheck to paycheck anyway, so it doesn’t make any sense. They’re taxing us to death,” said Springs resident Janet Goad.
Here’s a look at how it breaks down. If you make $50,000 a year, $80 extra a month will come out of your paycheck. That adds up to about a grand more you’ll pay each year.
While the wealthy will see their tax rates increase with Tuesday's fiscal cliff deal, the payroll tax will hit every working American.
“Wow, it’s scary. We thought we had all our ducks in a row, but you still don’t,” said Springs resident Frank Martinez. He adds, “You’re always trying to make sure you have something to fall back on, and that’s getting mighty lean these days.”
If your household makes over $450,000 a year, between the fiscal cliff deal, the new health care law and the payroll tax, it adds up to about a 10 percent increase.
Middle class Americans are protected from income tax increases under the deal, but all workers have to deal with the payroll tax that is now back to normal.
“It’s been very nerve-wracking for everybody. It’s like endless sleep waiting to hear and now with this payroll tax, you start cutting immediately, that’s what you have to do,” said Michelle Martinez.
You’ll see more come out of your paycheck starting in March.
If you want to do the math yourself, an on-line calculator will help you figure it out. Here is the link:
And be prepared. All the fiscal cliff changes will affect how quickly you can get your tax refund this year. It could be delayed anywhere from four weeks to two months.