How the fiscal cliff deal will affect your tax bill - WCAX.COM Local Vermont News, Weather and Sports-

How the fiscal cliff deal will affect your tax bill

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It's 157 pages long.

"Finally, finally, finally after months, years of bickering, we have a tax bill," tax expert Rick Wolfish said.

Wolfish has read the bill.

"The bad news, Gina, is everyone's tax is going up. But the good news is that it's going up a fraction of what they would have gone up if the fiscal cliff had hit us all," he said.

Wolfish says the main change hitting your wallet is that the payroll tax break ends. Effective immediately everyone will pay 2 percent more of their paycheck to Social Security.

"For every $50,000 that you make, your taxes will go up $1,000 per year," Wolfish said.

Also impacted-- single people making more than $250,000 and married couples making over $300,000. They will see itemized deductions and exemptions like property taxes, kids, the Vermont income tax and charitable donations phased out.

"Up to 80 percent of your itemized deductions can be phased out," Wolfish said.

Single people making more than $300,000 and married couples making over $450,000 will see the biggest impact, says Wolfish. In addition to deductions being phased out, tax rates will rise almost 5 percent to 39.6 percent. And long-term capital gains and dividends like stock will now be taxed 5 percent more at 20 percent.

Estate taxes are also rising. The first $5 million in inheritance is still exempt, but after that the tax rate goes up 5 percent to 40 percent.

"It's called the 179 deduction, not to be the code section quoter," Wolfish said.

And finally business owners can now write off $500,000 of fixed assets like furniture, machinery and computers each year. And they can write off 50 percent of that cost if it's bought new.

"Baboom! You could write it off in year one. So, hopefully companies will purchase more fixed assets. It will create jobs," Wolfish said.

Wolfish says not going over the cliff averted many drastic changes and automatic spending cuts, saving some tax breaks that were at risk. For example, parents can still get a $2,500 tax break for every kid in college.

"No political party or the president got what they wanted, but they came together and made a plan," Wolfish said.

People can usually start filing their taxes Jan. 1, but the IRS says filling is delayed as officials review the new law. It's not sure yet when the tax filing season will start or the impact this delay will have on processing of any refunds people might have coming to them.

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