I have to be a Debbie Downer for a minute and tell you that the pending tax changes, being called the “fiscal cliff,” are going to affect you. They’ll affect everyone. The mostly likely way they’ll affect you? Your paycheck is going to decrease.
For the past couple years, we have enjoyed what’s called a “payroll tax holiday.” That means that the amount withheld from our checks for Social Security/FICA was two percent lower than normal. That holiday, along with the rest of the 2012 holidays, ends at midnight on December 31st.
Additionally, higher income tax rates in general go into effect on January 1st, which means even more withholdings from your check. There is a chance that Congress will address this (and other sweeping changes) before year-end, but every day that passes makes this less likely. Prepare to see a smaller check next year.
Another change that might affect you directly is the reinstitution of the Personal Exemption Phaseout. In plain English? If you earn more than $200,000 ($250,000 if you’re married), the amount you can deduct for itemized deductions like charitable donations or mortgage interest will be reduced. If you’re charitably inclined, you might consider making your 2013 donations before the end of 2012 to ensure that you receive the full deduction.
While the Fiscal Cliff is a perfect storm of several tax-related issues, these are a couple elements that will hit home with many Career Girls. For a more comprehensive explanation, check out this LearnVest article that covers all of the changes and the background.