Bible Money Matters

Christian personal finance

Menu
    • About
    • Archives
    • Contact
    • Close
  • Making Money
      • Popular Articles

        • 50 Ways To Make Money: Maximizing, Creating And Increasing Your Income
        • 10 Weird And Unconventional Ways To Make Money
        • Making Money With A Blog (e-Book)
        • 10 Places To Sell Or Trade Your Unused (Or Broken) Electronics
        • Ways To Make Extra Money Series: 20 More Income Generating Ideas From Our Readers
        • Making Side Income Can Help Blunt The Impact Of Becoming A One Income Family
        • Earn Cash Back With Discover it® Credit Card
      • Recent Articles – Making Money

        • Best Sites Like Fiverr To Make Money As A Freelancer
        • 13 Of The Best Independent Contractor Jobs
        • 25 Of The Best Gig Economy Jobs
        • How To Make Money Blogging: Turn A Blog Into A Business
      • Categories

        • Making Money
        • Investing
        • Retirement
        • Jobs & Work LIfe
        • Money
        • Income
    • Close
  • Saving Money
      • Popular Articles

        • 50 Easy Ways To Save Money Every Month
        • 10 Weird And Unconventional Ways To Save Money
        • 10 Practical Ways To Save Money And Increase Your Net Worth
        • How To Save Money On Just About All Of Your Regular Monthly Bills
        • Ways To Watch TV Without Paying An Arm And A Leg For Cable TV
        • Save Money On Your Hospital Bill - Just By Asking
      • Recent Articles – Saving Money

        • How To Save $100k In 7 Practical Steps
        • Stairs App Review: Save And Invest To Earn 4-6% Interest
        • Honey Review: Save Money Automatically When You Shop Online
        • 9 Convincing Reasons Why You Need An Emergency Fund
      • Categories

        • Saving Money
        • Frugality
        • Planning
        • Finance
        • Saving For Retirement
        • Savings Accounts
    • Close
  • Banking
      • Best Rates For 2019

        • Best Credit Cards
        • Best Savings Accounts
        • Best Mortgage Rates
        • Best CD Rates
        • Best Brokerages
        • Free Credit Scores
      • Recent Reviews

        • TradeStation Review: Commission Free Stock And ETF Trades
        • Firstrade Review: Commission Free Trades on Stocks, Crypto, And Options
        • Cadre Real Estate Investing Review: Commercial Real Estate Investing
        • Axos Self Directed Trading Review: Invest, Trade Stocks For Free
      • Categories

        • Bank & Software Reviews
        • Investing
        • Credit
        • Banking
        • Mortgage
        • Insurance
        • Family Budget
    • Close
  • Recommended
  • Video
    • Close

Taxmageddon: Will We See A Huge Tax Increase Due To Expiring Tax Breaks At End Of 2012?

By Peter Anderson 5 Comments - The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited April 18, 2012.

Share4
Pin3
Tweet
Share
7 Shares

Earlier this month I completed filing my taxes for the 2011 tax year, and all taxpayers had to have their returns filed by tax day April 17th.  As we all decompress from hours spent figuring out our taxes, and planning for the coming year’s filing, there is something big looming on the horizon at the end of the year.

Some folks are calling the end of the 2012 tax year “Taxmageddon” or  a “Tax Armageddon” because a whole host of tax credits, tax cuts, deductions and other tax provisions are all expiring at once, meaning that American families could be seeing a huge tax increase in 2013, unless something is done.

taxmageddon tax increase

Why Would We Be Seeing a Big Tax Increase In 2013?

So the question is, what is going on, and why will we be seeing a big tax increase in 2013 if nothing is done?

As many Americans were scrambling to get this year’s taxes done, analysts were warning about a bigger tax day — what some call a tax Armageddon, or “Taxmageddon,” to characterize its potential effect on the U.S. economy.

At the end of the year, some $500 billion in tax breaks expire all at once, hitting American households with an average tax increase of $3,800 — if Congress doesn’t act….

“Almost the entire tax code has been put on a year-to-year lease, and in some cases, month-to-month lease, which is no way to run a tax system,” Scott Hodge of the Tax Foundation said.

The expiring cuts would hit all income groups but those at low and middle incomes the hardest.

“Taxmageddon falls 70 percent on middle and low income families. That’s because 60 percent of the Bush tax cuts were for middle- and low-income taxpayers,” Dubay said. The payroll tax cut was aimed at the same taxpayers.

“No American will be unscathed at the end of this year,” Hodge said. “Taxmageddon hits all of us.”

So the host of expiring tax breaks will mean huge tax increases, a majority on middle and low income families, if  Congress doesn’t act.

What Tax Breaks Are Expiring After 2012?

So what are the main tax breaks expiring at the end of  2012?

Among the changes that we could see:

  • Tax rates increase:  Bush/Obama tax cuts expire.  A bottom rate of 10 percent goes to 15 percent.  A top rate of 35 percent would increase to 39.6 percent.
  • Child tax credit decrease: The $1000 child tax credit would be halved, going from $1,000 a child to $500.
  • The marriage penalty would return: The standard deduction for married filers would no longer be twice that of a single filer – re-engaging the so called “marriage penalty”.
  • Tax on dividends increase: The tax on dividends (which many seniors rely on) would go from 15 percent to 39.6 percent.
  • Payroll tax cut ends: The payroll tax cut which was extended for 2012 would expire, meaning an increase in taxes for all those who pay taxes. The average taxpayer saw a $1000 decrease in taxes due to this cut.
  • Alternative minimum tax fix would erased: The result of the fix expiring would mean that some 34 million taxpayers would be affected by AMT next year.
As mentioned, the above provisions expiring, among others,  account for nearly 500 billion in expiring tax breaks.  That will mean an average tax increase of $3800 for American households in 2013.

Will Congress Act To Avoid All The Tax Provisions Expiring At Once?

So the question is, will congress act to avoid seeing a huge tax increase at the beginning of next year?

With all that facing the economy, wouldn’t Congress act? Ordinarily, yes — but this is a presidential election year.

“It’s my guess that nothing will happen on any of these issues until after the election,” Hodge said. “Here we have a case where many in Congress will be retiring, maybe even a president. How do you fix system with that uncertainty?”

And Capretta adds, “it’d be hard for an old … outgoing Congress to make decisions when a new Congress is about to come in. And I think the public might react a little badly to that as well.”

Nevertheless, one congressional source says the chances of a lame duck session are 100 percent: Congress can’t afford to take the end of the year off.

So it sounds like odds are good that Congress will act in some way to re-enact or extend at least some of the provisions so as to avoid the huge increase for everyone. Until that happens, however, there will be quite a bit of uncertainty.

Do you think that Congress will act to extend the expiring tax breaks?  Will they let them expire?  Will they create new ones?  Tell us your thoughts in the comments.

Related Posts

  • Payroll Tax Cut Temporarily Extended For 2012

    The payroll tax holiday was extended by Congress temporarily through February of 2012. Here's what you can expect.

  • Payroll Tax Cut Extended Through The End Of 2012

    Congress has passed and Obama will sign an extension of the payroll tax cut through the end of the 2012 tax year. Here is what…

  • 2011 Federal Income Tax Brackets: IRS Marginal Tax Rates

    The 2011 tax year promises to be one where there will be some significant changes to the marginal tax brackets. What those changes exactly will…

Share4
Pin3
Tweet
Share
7 Shares
Last Edited: 18th April 2012 The content of biblemoneymatters.com is for general information purposes only and does not constitute professional advice. Visitors to biblemoneymatters.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

This article is about: News, Taxes

About Peter Anderson

Peter Anderson is a Christian, husband to his beautiful wife Maria, and father to his 2 children. He loves reading and writing about personal finance, and also enjoys a good board game every now and again. You can find out more about him on the about page. Don't forget to say hi on Pinterest, Twitter or Facebook!

Comments

    Share Your Thoughts: Cancel reply

  1. AAAMP Blog says

    You have just spelled out one of the reasons investors need be very cautious with their investments NOW. Now is the time to put extra effort into risk management!

    Reply
  2. Donny Gamble says

    I think we will continue to see taxes sky rocket because the U.S. needs to pay down some of this debt some how

    Reply
  3. WorkSaveLive says

    Wow…frankly I didn’t realize that much was expiring. I’ve always heard of the Busy Tax Cuts but I never cared enough to really look much deeper. This is going to affect a lot of people.

    They’re going to have to extend it, right? I agree with Donny that taxes will have to go up but I’m not sure that’s the first move somebody wants to make when stepping into office.

    Reply
    • Peter Anderson says

      All signs are that they’re going to have to extend some or all of the cuts. I think part of the problem is that Republicans and Democrats can’t agree on which ones to extend, and being an election year makes it even more complicated.

      Reply
  4. Jenna, Adaptu Community Manager says

    I really hope they extend them (not sure they can get approval for new ones in time for 2012 taxes). However, the government needs to get it’s own debt under control…

    Reply
Previous Post: Paying Down Debt With Gazelle Intensity? How Much Of An Emergency Fund Do You Need?
Next Post: Top 5 Things To Do With A Tax Refund
Discover Investment Platforms

Popular Posts

  • 21 Easy Ways To Earn Free Amazon Gift Cards
  • 10 Best Free Tax Filing Services And Software Online
  • 21 Apps That Pay You Real Money Fast
  • 17 TV Apps And Live TV Streaming Services To Watch TV Free
  • 30 Legit Online Jobs That Pay Well
  • 37 Easy Ways To Get Free Gift Cards
  • How To Get Free Stock
  • 40 Easy Ways To Get Free Money Fast
  • 21 Places To Read Free Books Online
  • 24 Legit Online Jobs
  • 17 Best Work From Home Jobs: A List Of Legit Online Jobs That Pay Well

Recent Posts

  • How To Save $100k In 7 Practical Steps
  • How to Save Money When Remodeling A Home
  • How To Hire A Contractor For Your Remodeling Project
  • Remembering 9/11 Years Later: Where Were You On That Fateful Day?
  • TradeStation Review: Commission Free Stock And ETF Trades
  • Firstrade Review: Commission Free Trades on Stocks, Crypto, And Options
  • Cadre Real Estate Investing Review: Commercial Real Estate Investing
  • Best Sites Like Fiverr To Make Money As A Freelancer
  • Axos Self Directed Trading Review: Invest, Trade Stocks For Free
  • 30 Quotes About Easter And Resurrection: He Is Risen!

Disclaimer

The information contained in BibleMoneyMatters.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation.

In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.

Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.

Amazon and the Amazon logo are trademarks of Amazon.com, Inc. or its affiliates.

We respect your privacy: Privacy Policy.

Thanks for visiting!

Bible Money Matters - Seen On These Sites and more..
Bible Money Matters is a personal finance, entrepreneurship and investing community. Give more, save more and live more.

Copyright © 2023 · Bible Money Matters | Sitemap | Advertise | Privacy Policy