A calculator lets you see what your federal income and Social Security taxes are now, and what they will be if we fall off the ‘fiscal cliff’
Americans will see a steep jump in their tax bills starting in January 2013 unless lawmakers reach an agreement to soften the impact of expiring tax breaks — known as the “fiscal cliff” — by the end of 2012. But just how much of an impact will that be?
Using a calculator based on an analysis of tax rates by the Tax Policy Center, we computed combined bills for federal income and Social Security taxes under different scenarios.
Those at the higher end of the income scale will face the biggest tax hikes under the “fiscal cliff” scenario in dollar terms, but many lower-income earners will see larger percentage increases.
For example, a single person making $15,000 and having only himself as an exemption would see a $555 increase in his tax bill or nearly 49 percent more than the bill under current rates. The expiration of benefits for students and low-income earners could deepen the cliff impact for people in this group, depending on their circumstances.
Alternatively, a married couple filing jointly with three exemptions and a $125,000 income would face $6,135 more in taxes or a 28 percent increase. And if they claim child tax credits, the bill could rise by $500 per child, as current levels of the credit are reduced.
High-income taxpayers will be subject to an additional tax of nearly 1 percent on income over certain thresholds starting in 2013. The tax is part of the Affordable Care Act and is not included in the “fiscal cliff” calculations. Also excluded from the calculator are changes in tax deductions and the effect of the Alternative Minimum Tax.
Because the calculator is limited to one figure for income, it may understate Social Security taxes for two-income families earning more than $113,700. Depending on the amount earned by the second earner, the understatement could be as much as $4,775 under current tax rates and $7,049 under the fiscal cliff scenario.
See related: How high is your fiscal cliff?