Expiring Payroll Tax Cut Means Your Taxes Will Go Up In 2013
BOSTON (CBS) – With the fiscal cliff averted, many people making less than $400,000 and couples making less than $450,000 thought their taxes wouldn’t be going up.
That’s not entirely true.
Legislators claimed that they had prevented tax increases for the middle class.
But, part of the deal negotiated in Congress will leave most Americans paying more federal taxes in 2013.
The Social Security payroll tax is going up from 4.2 percent to 6.2 percent.
The tax rate had been temporarily reduced two years ago and both sides let that tax cut expire in this new deal.
So, a household that earns $50,000, will pay a $1,000 more in taxes in 2013.
“The average person is going to be paying about $133 a month more in taxes,” financial planner/IRS attorney Lauren Young told WBZ NewsRadio 1030 Wednesday.
Lauren Young talks to WBZ’s Laurie Kirby
Rob Lutz, president of Cabot Money Management, says it’s really not an increase, but a “replacement of a tax that did exist a few years ago.”
The money from that temporary two-year reduction was used to stimulate the economy to get through the recession.
“And it did just that, it did help,” Lutz told WBZ’s Anthony Silva.
“So now that we’ve recovered a little bit and we’re a little bit stronger, they’re replacing that tax and putting it back into the six-percent level.”
“I think it was viewed that this was a good time to at least bring back some of the taxes we had in the past.”
The Wall Street Journal has come up with a calculator to help you determine how much more you’ll pay.
According to CBS News, earnings up to $110,100 in 2012 will be taxed for the Social Security program. The earnings limit jumps up to $113,700 in 2013.