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There are a slew of 2013 tax law changes ready to go into effect if Congress fails to reach an agreement on the fiscal cliff.
According to the Tax Policy Center, almost 90% of taxpayers, both rich and poor, will see their household tax bill increase by about $2,000 next year with the top 1% seeing a tax increase on average at $121,000.
In other words, take-home pay will decrease, which has been referred to as "Taxmageddon,"with the middle class especially hard hit from the changes.
But that's just a small piece of the large puzzle of 2013 tax law changes. Here's a more detailed look at what could hit your income, investments and savings.
Capital Gains Rate
Thinking about selling that vacation home or selling some stock? You may want to do it before year's end to avoid a higher tax rate.
Unless there's a congressional truce, the capital gains rate will increase to 20% in January, up from 15% now.
This will not affect qualified retirement plans such as IRAs or 401(k) plans.
For those with higher income levels, they'll also incur a 3.8% surtax on capital gains, dividends, royalties and real estate sales thanks to the Affordable Care Act.
Add in a limit on itemized deductions that will kick in for 2013 and there is an additional 1.2% rise.
Do the math and this means the effective capital gains rate will hit 25% on Jan. 1.
The higher income has been defined as $200,000 for a single filer and $250,000 for a married couple.
Taxpayers will say goodbye to the 2% payroll tax reduction.
This means a $50,000 salary could incur $1,000 more in taxes with a higher income filer making more than $108,000 would pay $1,950 more on average, reported the Tax Policy Center, or a 0.9% tax on earnings.
Higher is defined as more than $250,000 for married filers and more than $200,000 for singles.
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