The fiscal cliff is a term that has been shoved down the throat of the American people for the majority of the last quarter of 2012. If you are unsure of what it means for you, your family and your financial situation it may seem like a scary situation that is completely out of your control. However, if you fully understand what this is and how it affects you, you will be better prepared for any changes that may occur.
Basically, with the compromise that was reached there are winners and losers in the deal that has been made. While trying to understand all the details of the agreement will definitely be overwhelming, understanding what it means for you is extremely beneficial. Use this guide to finally know what the fiscal cliff means for you:
For all the American families who have children you are actually a winner in this deal. The child tax credit that the Bush administration implemented has been extended until 2017 and a compromise has been reached that will not increase milk prices, which is extremely beneficial for families with young children.
For those parents that have children in college were also winner in this deal. The benefits they are receiving include:
- Ability for parents to establish a savings account for their children that will be tax free and for up to $2,000 each year they have the account.
- Allows you to receive deductions on college or school related expenses such as the tuition, supplies and other expenses that may be incurred.
- Has allowed for the extension of the $2,500 tax credit until 2018.
Those individuals who are considered the upper class earners are also not suffering any extreme changes with the deal that has been made. They are still able to fall in the 33 to 35 percent tax bracket, meaning that the wishes that President Obama had to raise this rate did not occur.
Those who receive Medicare do not have to worry about finding new care. The agreement that was made ensures doctors still receive their full payments, thus ensuring quality care for all Medicare recipients. The downside to the new ObamaCare program is that all tax payers will end up with about an extra $1000 to pay in taxes to support all of the people on Medicare. This is something to prepare for since April is not far away and you will have to pay money.
Overall the agreement that has been reached to avoid the fiscal cliff is one that offers benefits for many classes of tax payers. Knowing how it affects you is the responsible thing for you to do and safe-guards your financial situation. The IRS does offer payment plans for individuals that owe more than $1,000 in taxes. Consider opening a savings account so you can save money to pay for next year’s taxes.