Despite a fiscal cliff deal being reached, working Americans will see less money in their paychecks this year.
A temporary reduction in the Social Security tax was not reinstated by the federal government, meaning our paychecks will shrink by two percent.
“When Illinois changed their tax by 2 percent, people really didn’t notice it because Social Security taxes were lowered at the same time,” said accountant David Robbins with Nieminski Robbins and Associates Certified Public Accountants in South Barrington and Chicago. “Now the temporary lowering of the 2 percent is gone so people are going to see less take home pay.”
Robbins explained that the first $113,000 of income is taxed under the Social Security payroll tax policy. This means that a person making $100,000 will see $2,000 less money in their pockets.
“Once you give someone relief and then you take it away, it really bothers people more. Every paycheck you’re going to see it,” Robbins said.
The Senate and House did extend most of the tax breaks enacted under President George W. Bush, but the wealthiest Americans will still take a hit.
“For single filers above $400,000 or $450,000 for married couples, they’ve implemented the new tax rate of 39.6 percent, up from 35 percent,” Robbins said.
Those who make more than $450,000 in capital gains will also be taxed more. Dividends are now taxed at 20 percent instead of the previous rate of 15 percent.