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Wednesday, January 2, 2013

Fiscal Cliff Deal Means Higher Tax Bills For Most Americans

The lights of the U.S. Capitol remain lit into the night as the House continues to work on the "fiscal cliff" on Tuesday, Jan. 1, 2013. (AP/Jacquelyn Martin)

The lights of the U.S. Capitol remain lit into the night as the House continues to work on the “fiscal cliff” on Tuesday, Jan. 1, 2013. (AP/Jacquelyn Martin)

While less than 1 percent of households will face an income tax increase this year under the fiscal cliff plan approved by Congress, a whopping 77 percent will pay more in their Social Security payroll tax.

The payroll tax will increase by 2 percentage points from 4.2 to 6.2 percent on income up to $113,700, affecting 160 million Americans. That means a person making $50,000 a year will shell out an additional $1,000 this year.

The country’s wealthiest Americans will also be paying more. Congress returned the marginal tax rate to 39.6 percent for individuals on income over $400,000 and $450,000 for couples.

But the biggest hit to wealthy Americans comes from part of the bill that restores limits on deductions and exemptions to American families making more than $300,000.

They will still be able to claim the same deductions on income up to $300,000, but income over that amount will face limits in deductions.

But overall, very few households making less than $500,000 will face an income tax increase.

Guest:

  • Binyamin Appelbaum, New York Times

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