Many of us spent the first day of 2013 recovering from the last night of 2012, but the men and women of Congress didn’t have that luxury because they were busy coming to an agreement on the fiscal cliff. A deal was finally made on Tuesday evening but WTF does it mean and, more importantly, how does it affect you?
If you want to know what coulda happened without a deal, this video will help explain that. Now, grab a celebratory glass of milk (I’ll explain later) and lemme break it down for ya. The fiscal cliff is a series of tax and spending cuts that was set to kick in at the start of this year. Although Congress hasn’t yet reached an agreement on the spending cuts, they have reached one on taxes.
+ Income Tax
Income tax rates will stay the same for most Americans, but the rate for Justin Bieber people making over $400,000 a year or Brangelina couples making more than $450,000 combined will increase from 35% to 39.6%. Itemized tax deductions for people making over $250,000 and couples making over $300,000 will be capped.
+ The Payroll Tax “Holiday” Is Over
Just as we say goodbye to the holiday season, another holiday is over: the “Payroll Tax Holiday.” A couple years ago when the economy wasn’t lookin’ so hot, Congress lowered the Social Security payroll tax from 6.2% to 4.2% for all American workers. The goal was to give us more money to spend on shoes, and dinner, and needy girlfriends and stuff, therefore stimulating the U.S. economy. This tax “holiday” was only supposed to last a year, but was extended for another one. However, on midnight on January 1, the payroll tax returned to 6.2% on up to $113,000 of income. That means if you make $30,000 a year, you’ll get about $50 less every month.
+ Got Milk?
Babies, kittens, and broke 20-somethings who live off cereal (me) can finally rest easy because the bill also included a measure preventing a steep increase in the price of milk.
If you’re still confused, you’re probably not alone. Check out this handy New York Times chart to figure out exactly how your moolah will be affected by the fiscal cliff deal.
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