The upcoming Fiscal Cliff will have a direct impact on those of us living in Arizona. Here in the desert we will be impacted in five main ways:
- Payroll Tax Cuts — These cuts will cause the current payroll tax to go from 4.2% to 6.2% off every check you bring home.
- Cut to the Marriage Deduction — Presently a married couple filing jointly can take twice the normal deduction. This means the same married couple gets to take two standard deductions, which should make sense given there are two of them filing their taxes. However, after Jan. 1, 2013 a married couple filing jointly will only be allowed to take a full deduction and then 2/3 of the next standard deduction.
- Cut to the Child/Dependent Credit — Right now if you have a child or a dependent living in your home you can take a $1,000 credit for that dependent. When that same household goes to file taxes for the 2013 tax year, the fiscal cliff will make it so each child or dependent will only be a $500 credit.
- Mortgage Interest Deduction Eliminated — Perhaps the most guarded of all deductions in the tax code, the mortgage interest deduction, is set to completely disappear from the tax code as of 2013. This means anyone owning a property and deducting the interest they pay on that mortgage will no longer be allowed to take that deduction.
- Tax Bracket Increases — All income tax brackets will experience a 3-5% increase on the taxes levied for the income of every wage earner in Arizona.
On balance, in Arizona the median income is about $65,000 for a family of four. The cuts and tax increases within the fiscal cliff will amount to more than $3,000 of increased tax burden on this same family of four which comes out to a little more than $250/month now in increased taxes alone.
To find out how the Fiscal Cliff applies to you, call and schedule a FREE LEGAL consultation with an attorney at Wells Law Group — 480.428.3290.