Money Matters: New Year brings new changes to U.S. tax code, Social Security payments
With the new year comes changes to the national tax code, but higher-income earners may not feel the pinch as much in New York as in other states. Bree Driscoll filed the following report.
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Washington averted going over the fiscal cliff and with the new deal comes some changes to the tax code. Under the legislation, individuals making more than $400,000 or couples making more than $450,000 move into a higher tax bracket.
But many accounting experts say most people will not see a huge difference.
"Most New Yorkers who are in the higher-income tax brackets are already in the AMT, or the Alternative Minimum Tax, so they are paying a minimum tax," says John Lieberman, the managing director of Perelson Weiner. "So for many people, their actual tax or affective tax rate will not be going up that much, unlike other parts of the country."
Those higher-income earners will see higher tax rates on capital gains and dividends, rising to 20 percent from 15 percent.
"Those items, I think, will eventually change the way people do that investment to try and minimize that tax," says Fred Slater, a practicing tax certified public accountant for MS 1040 LLC.
Some say the new tax laws may even affect whether or not some decide to get married.
"It doesn't make sense to get married on that level. Lets be real," Slater says. "Even though the rates are higher for single, two single people making a total of $500,000 will pay less tax than one married couple making $500,000."
Where some New Yorkers are already feeling the pinch is in changes to Social Security. For the last two years, Congress has cut back how much individuals contribute to Social Security. Now that rate has gone back up to 6.2 percent, from 4.2 percent.
"Anyone earning up to $100,000 -- the limit is $110,000 -- you are basically losing $200 a month and that affects your budget," says Slater.
While the changes may seem daunting to some, experts say taxpayers will get used to them.
"It is going to be gradual," says Ellen Minkow, a practicing tax CPA for MS 1040 LLC. "Maybe they will take a little more from us next year but we will get used to it. We are all in this together."