The Homa Files

Partially obscured by the hoopla on Times Square and the bizarre Fiscal Cliff legislative process, is a simple fact: Your taxes have gone up … even if you’re not a millionaire or billionaire making more than $200,000 (oops, I meant $400,000)..

There are 2 big ones: elimination of the 2% payroll tax “holiday” … and the ObamaCare tax on “unearned income”

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Payroll Tax

For the past 2 years, payroll taxes – you know, the automatic deductions for Social Security and Medicare – were reduced by 2% to stimulate the economy.

The so-called “2% tax holiday” ends on December 31 and there are no apparent moves to renew it.

According to USA Today:

A temporary reduction in Social Security payroll taxes expires at the end of the year and hardly anyone in Washington is pushing to extend it. Obama hasn’t proposed an extension, and it probably wouldn’t get through Congress anyway, with lawmakers in both parties down on the idea.

Even Republicans who have sworn off tax increases have little appetite to prevent this one .

Bottom line: The expiration will cost a typical worker about $1,000 a year, and two-earner family with six-figure incomes as much as $4,500.

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ObamaCare Tax …

We’ve written about this one before … see The 3.8% solution … here comes the tax pile-on for details.

In essence, one of the tax increases funding ObamaCare is a 2.9% tax on investment income … essentially slapping payroll taxes on so-called “unearned income”… “high earners get dinged an additional .9%.

The “unearned income” tax applies to:

• dividends
• interest, except municipal-bond interest
• short- and long-term capital gains
• income from the sale of a principal home (> $500k, not rolled over to another house)
• a net gain from the sale of a second home
• passive income from real estate and investments, such as limited partnerships.
• the taxable portion of annuity payments
• rents (received by landlords)

Of course, the tax doesn’t apply if you don’t have any of the above income sources.

But, if you do have investment income, the tax applied whether you’re a millionaire or billionaire or not.

Happy New Year …

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This entry was posted on January 1, 2013 at 7:35 am and is filed under tax, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.