KNOXVILLE — National news outlets are awash in reports on the "fiscal cliff" coming in January 2013 if Congress and the President fail to act. Lee Franck with Knoxville's H&R Block shared some key tax changes that are certain to impact local households, and what is coming in the next few years with the "Affordable Care Act."
According to Franck, the Alternative Minimum Tax will increase in 2013 and will cost an average household $2,000-3,000 more in taxes. These figures are for households that range in income from $50-100,000. The increases will be worse for those families who itemize their deductions on tax day.
Current tax rates, set during the Bush Administration and continued through the Obama presidency, are set to revert to levels existing prior to 2001. Rates would increase from 10, 15, 25, 28, 33 and 35 percent to 15, 28, 31, 36 and 39.6 percent. For the lowest income earners, seeing one's tax liability jump from 10-15 percent is equivalent to a 50 percent tax increase.
For those who have investments and receive dividends, the capital gains and dividends rates will increase from 0 and 15 percent, to 10 and 20 percent. There is potential that the top capital gains recipients could see their rates go over 20 percent.
This will affect those who sell property in 2013. Franck has been advising his clients to sell property before the end of the year, to avoid paying these higher rates.
Other tax credit changes that could hit Marion County families include the Earned Income Tax Credit and the child tax credit (reduced from $1,000 per child to $500).
A great deal of discussion is held regarding tax increases to those households that earn $250,000 or more, while protecting lower earning Americans. However, people in the $250K pay range do not take advantage of these credits, so those who will feel the effects of the expiration of these tax laws have lower incomes.