Not knowing what will be with the expiration of the Bush tax cuts is finally getting some notice in the media – to put it mildly. Just trying to sort out what will happen is no simple task and something I am furiously working on (from the charitable gift planning perspective).
In my initial research into these issues , I discovered something very disturbing – nothing to do with charitable giving but I strongly suggest reading this article carefully if you and your spouse earn up around $100,000 in total.
For married couples with adjusted gross incomes (AGIs) between $60,550 to $72,500, the impact of the expiration of the Bush tax cuts (which will happen if the President and the House can’t come to terms soon) will be incredible. The increase in actual tax dollars in 2013 from this group will be between $7,871 and $9,425 for each household. How is that for a group that is probably struggling already to pay bills?
In other words, if this ends up being your AGI (and it is hard to tell because AGI is only really known after knowing your deductions when doing your taxes), you might owe the IRS between $655 and $785 extra a month – in addition to your current living expenses.
How do I know this? Simple math. Under the current law, this AGI range for married filing jointly pay at the 15% federal bracket level. Come January 1, 2013, this unlucky group will be pushed into the 28% federal bracket. That is an increase of 13%. Most of the bracket increases will be 3% except for the highest (earners of $398,350 and up – they get a 4.6% increase) and the lowest (married earners of $17,900 or less get a 5% increase).
So, there you have it – a middle class, married filing jointly group gets slammed with Hurricane Bush Tax Cuts Expire. Look out for updates on this storm as they come in!
If you are interested in looking at the various brackets (before and after), check out this story from Forbes by clicking here.