Even if the fiscal cliff is averted, did you realize your taxes will go up anyway? That's because the two parties are so focused on whether the Bush tax cuts get extended for those making $250,000 or more, they are ignoring the other tax implications.
First, the Obamacare taxes are not being opposed by the Republicans as part of the fiscal cliff negotiations. Although they campaigned on repealing Obamacare, they realize they don't have enough political capital to make this happen. As a result, those who make more than $200,000 ($250,000 for married couples) will be hit with extra taxes. First, they will pay an additional 0.9% Medicare hospital tax on income above the limit. Second, they will pay an additional 3.8% tax on the lessor of their investment income (dividends and capital gains) or wage income that is above the limit.
Everyone will pay 2% more in payroll taxes. That's because the 2010 Obama tax cuts, including a 2% payroll tax cut, expires by 2013.
Even if the fiscal cliff is averted, it's most likely that those receiving extended unemployment benefits will lose that additional source of income. That's because Obama has hinted he would be willing to give them up as part of a fiscal cliff plan.
What It Means to You
Most likely some kind of fiscal cliff deal will be made before the end of January. Pay attention to what's included. Most likely, it will mean the Bush tax cuts on those making less than $250,000 will continue. In that case, at least your tax rate won't revert to the Clinton-era levels. But it doesn't mean your taxes will stay the same. In all likelihood, even with a deal, they will go up. However, stay tuned, because the negotiations change things from week to week, and even day to day.