The Good News:
- Income taxes: The Bush-era tax cuts will remain permanently in place for the vast majority of Americans. For individuals who make up to $400,000 a year—or families making up to $450,000, tax rates will increase from 35% to 39.6%.
- Unemployment benefits will be extended for one year.
- Capital gains taxes, which are paid on the sale of stocks, real estate, and other capital assets, will increase from 15% to 20% for individuals making more than $400,000 or families making more than $450,000.
- Tax breaks – including the Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax credit – are extended for five years.
- “Doctor Fix” — A 27% cut in reimbursements to doctors treating Medicare patients were prevented for a year.
- Estate taxes will increase from 35% to 40% with the first $5 million exempted for individual estates.
And the Not-So-Good News:
- Payroll Tax Hike: The 2-percentage point cut to the payroll tax expired at the end of 2012 and was not renewed. That means the Social Security payroll tax will increase from about 4% to 6.2%. That’s approximately $1,000 more for a typical family earning $50,000 a year.
- Sequestration – or automatic spending cuts worth $1.2 trillion – has been put off for two months. Finding a solution with the new Congress will most likely not prove to be an easy task.
- The Debt-Ceiling: Within the next two months, Congress must find to raise the the $16.4 trillion debt ceiling or face a potential government shutdown. The country hit its debt ceiling limit on Monday.