What Could Happen if the fiscal cliff?

 

 

 

If Washington drives the country over the fiscal cliff, here is where taxpayers will feel the impact.

• Marginal tax rates for 2012 are 10%, 15%, 25%, 28%, 33% and 35%. Unless Congress acts, they will rise to 15%, 28%, 31%, 36% and 39.6%.


• Long-term capital gains, currently 15% for people in the upper tax brackets and zero for people in the 10% and 15% brackets, will increase to 20% for most people and 10% for those in the 15 percent bracket.


• The current rate on most U.S. stock dividends is the same as the capital gains rate. Next year, dividends will be taxed at the filer's ordinary income tax rate.


• Taxpayers in the higher income brackets will see a cut in their itemized deductions, and their personal exemptions will be reduced or eliminated.


• Parents will get a smaller tax credit for their dependents and fewer deductions for child-care expenses. Many college-related deductions will be reduced.


• More middle-income families will become subject to the alternative minimum tax.


• The top estate-tax rate will rise to 55% from 35%, and the amount exempt from the estate tax will drop to $1 million from $5 million.


• The so-called "Obamacare" surtax of 3.8% on investment income for couples with more than $250,000 in household income will kick in.


• A temporary 2.0% decrease in employee Social Security withholding expires, meaning a 2.0% increase in 2013.


• An estimated $272 billion in spending cuts go into effect, including automatic budget cuts, expiring emergency unemployment benefits, reductions in Medicare payments to doctors, and other changes in spending policies.