Working a new Budget when Taxmaggedon strikes.

[mks18412]

Has anyone thought how they are going to work the new tax increases into their budget? How can I figure out what my new income tax is going to be? I believe the income tax is going to increase by 3 or 4%. Not including a whole list of other tax increase..... Thanks in advance.

 

[Marionnette]

Has anyone thought how they are going to work the new tax increases into their budget? How can I figure out what my new income tax is going to be? I believe the income tax is going to increase by 3 or 4%. Not including a whole list of other tax increase..... Thanks in advance.

How do you budget for anything else that hits you? You have an emergency fund that covers your butt until you can evaluate the situation and think rationally.

Seriously, how do you calculate a "new income tax" when there isn't anything that has been done (or not done) regarding changes in the tax system? Wouldn't it be smart to wait to see what, if anything, Congress does before we start shouting that the sky is falling?

 

[Cheshire Figment]

As a CPA and professional tax preparer for over 40 years I have the following policy:

I do not worry about anything concerning future Income Tax Rules until I have read "Both Houses of Congress have passed, and the President has signed..."

and then I look at the professional publications.

 

[Colleen27]

I don't see much point in stressing about it until we know what the changes are going to be. I resent the fact that we're not going to get much warning because our ineffectual leadership isn't going to make any move that could possibly be viewed as controversial by any potential voter until after the November elections, but there's no point in getting worked up over a lot of "maybes" and talking head alarmism.

 

[mks18412]

How do you budget for anything else that hits you? You have an emergency fund that covers your butt until you can evaluate the situation and think rationally.

Seriously, how do you calculate a "new income tax" when there isn't anything that has been done (or not done) regarding changes in the tax system? Wouldn't it be smart to wait to see what, if anything, Congress does before we start shouting that the sky is falling?

Yes, Seriously!!! This is a budget thread right!?! Right! This was just a general budget question. Any-who.
I have an emergency fund but would not use it.... As of today nothing has changed in regards to the tax increases that are suppose to hit Jan 1st. So in my mind its a sure thing. I believe my question was what my new income tax would be. I am sure it would ruffle somes budgets to get hit with a tax increase of any kind.
Who was yelling "the sky is falling"?

 

[Ember]

I would just like to say I love "Taxmaggedon!" It's a change to the tax laws that are currently screwing my family over and I'm now calling it that!

 

[mks18412]

No stress here. It was more of an "I wonder....."

 

[MomToOne]

The one thing you can budget for at this point is an extra 2% for FICA. The deduction will be returning to 6.2% next year instead of the 4.2% it has been the last two years. Just deduct another 2% of your gross pay from your takehome.

 

[Colleen27]

Yes, Seriously!!! This is a budget thread right!?! Right! This was just a general budget question. Any-who.
I have an emergency fund but would not use it.... As of today nothing has changed in regards to the tax increases that are suppose to hit Jan 1st. So in my mind its a sure thing. I believe my question was what my new income tax would be. I am sure it would ruffle somes budgets to get hit with a tax increase of any kind.
Who was yelling "the sky is falling"?

Well "taxmageddon" does have a "sky is falling" tone to it...

But as far as the increases being a sure thing, I don't believe that is the case. I think we may very well see action on extending all or some of the expiring cuts after the election in November, but the last thing any politician is going to do is come out in favor of raising any tax of any kind immediately preceding a bid for reelection so there's just no point in raising the issue (and really, not much point in Congress meeting at all) between now and November 6.

 

[runwad]

The one thing you can budget for at this point is an extra 2% for FICA. The deduction will be returning to 6.2% next year instead of the 4.2% it has been the last two years. Just deduct another 2% of your gross pay from your takehome.

I put that 2% in my 401k so I wouldn't get used to it. New Year I'll adjust my 401k down the 2% and everything will always stay the same for me. The rest of the supposed increases we'll just have to deal with as they come down the pike.

 

[Marionnette]

Yes, Seriously!!! This is a budget thread right!?! Right! This was just a general budget question. Any-who.
I have an emergency fund but would not use it.... As of today nothing has changed in regards to the tax increases that are suppose to hit Jan 1st. So in my mind its a sure thing. I believe my question was what my new income tax would be. I am sure it would ruffle somes budgets to get hit with a tax increase of any kind.
Who was yelling "the sky is falling"?

I'd be more concerned about runaway inflation now that the Fed has decided to purchase mortgage-backed securities to the tune of $40 Billion every month. The only way that they can accomplish it will be to print more money, thereby deflating the dollar's value and increasing the price we pay for anything we import.

 

[MissDaisyofTexas]

I'm not stressing about anything yet. It seems like Congress always passes something during the 13th hour at the end of the year.

I"m wondering if the FICA will really go back up by 2%. I'm sure a lot of people have gotten used to having that extra 2% in their paycheck. I see that as the biggest adjustment.

 

[eliza61]

Has anyone thought how they are going to work the new tax increases into their budget? How can I figure out what my new income tax is going to be? I believe the income tax is going to increase by 3 or 4%. Not including a whole list of other tax increase..... Thanks in advance.

Actually the world is going to end on December 22nd, no need to worry.

So no I have not thought how I'm going to pay for "Taxmaggedon" what ever the heck that is.

Do you have some inside information that is saying when taxes will go up and by how much?

I plan on doing the same old boring things. trying to live within my means, save 10% toward my retirment (more if possible), keep my emergency fund at 3-4 months salary and enjoy each day that is granted to me and wish I had a dollar for every "sure thing" that was supposed to happen recently yet never did.

but if you want to budget for it, why not simply start living off of 4% less? this way when and if the new taxes jump in (do you know which ones will actually effect you?) you are already living on that new budget.

 

[mks18412]

Yes, I have seen acouple of sites that give specifics. Meaning what tax (or new tax) and how much of an increase. I dont think I would be allowed to post since it is political.

I have seen that if Congress does not step in income tax alone will increase by 3%.
I have savings set aside. I would not have to use it. But was just wondering how much more would be deducted..... I dont care who you are no one wants to pay more for anything.

 

[eliza61]

Do you have some inside information that is saying when taxes will go up and by how much?

Yes, I have seen acouple of sites that give specifics. Meaning what tax (or new tax) and how much of an increase. I dont think I would be allowed to post since it is political.

I have seen that if Congress does not step in income tax alone will increase by 3%.
I have savings set aside. I would not have to use it. But was just wondering how much more would be deducted..... I dont care who you are no one wants to pay more for anything.

Of course not, I think what most folks are thinking is that we will pretty much do what we are doing now when gas prices go up and when food prices go up. We adjust our budget accordingly. Heck, it's a crap shot every day when I pass the gas station on how much it will cost me to fill up my tank. Also last year everyone was panicking that congress would not get a budget deal through and at the end they did. so there really is no one who can say for sure, what congress will or will not do.

So once again, no I am not trying to work out a budget for an expense that may or maynot come to pass and if it does may or may not effect me almost 4 months down the road.

Truthfully I've got a few more immediate concerns to budget for. Next semesters college tuition, getting kid home for the holidays for college, holiday budget which includes helping grandmother flying in portugal and a few smaller items. This is just not on my radar.

 

[Colleen27]

Yes, I have seen acouple of sites that give specifics. Meaning what tax (or new tax) and how much of an increase. I dont think I would be allowed to post since it is political.

I have seen that if Congress does not step in income tax alone will increase by 3%.

The only specifics available are on which tax rates were enacted as temporary and are scheduled to expire... The 2% FICA "holiday" is simple enough to put a number on, but the rest is more complicated than a fixed percentage. The 10% bracket will go away, the marriage penalty will return, and the top 4 marginal rates will increase by 3-4%, along with a slew of other changes to specific tax rates (dividends, capital gains) and rules about deduction phase-outs.

 

[okeydokey]

The same way we have adjusted to the reduction in taxes that have been happening regularly for the last several years. If we have gotten used to having a bit more spending money due to the tax cuts we have received, we will respond by not spending quite so much when they go back up to what they used to be.

 

[Zhoen]

Thanks for bringing this up. Honestly, I haven't been looking too closely at this simply because it was all still up in the air, and like many of the PPs, I have other things going on between now and 1 Jan.

I think it's a shame that politicians are delaying this important work/not saying what they really will do because they're too busy trying to get re-hired and afraid of taking a position (any position!)

If everything was to hit, worst-case-scenario-style, we would have to slow our rate of debt repayment (we're trying to pay everything off right now), which is what has been happening with consumer goods' prices fluctuating, etc.

Even if we just get hit with the FICA and nothing else, it would be more than my annual raise, so we're going to get hit one way or another, but we're pretty much just in a wait-and-see.

 

[mistysue]

What is the marriage penalty?

I got married 4 years ago, the first year DH was a student most of the year, and the next 3 it's seemed like our tax % has gone down every year. I have no concept of what our taxes would be like if the current breaks disappear.

 

[eliza61]

Thanks for bringing this up. Honestly, I haven't been looking too closely at this simply because it was all still up in the air, and like many of the PPs, I have other things going on between now and 1 Jan.

I think it's a shame that politicians are delaying this important work/not saying what they really will do because they're too busy trying to get re-hired and afraid of taking a position (any position!)

If everything was to hit, worst-case-scenario-style, we would have to slow our rate of debt repayment (we're trying to pay everything off right now), which is what has been happening with consumer goods' prices fluctuating, etc.

Even if we just get hit with the FICA and nothing else, it would be more than my annual raise, so we're going to get hit one way or another, but we're pretty much just in a wait-and-see.

But wasn't the FICA deduction temprorary from the start? So folks who factored that into their budgets should have only done so for the short term.

It's like a bonus, some years you get it some years you don't.
It was just a 2 year deal to jumpstart spending not to factor into living expenses. The lower rate was supposed to expire in 2011 and we got a break.

Or am I misunderstanding?