What to Expect and How to Prepare Your Family for Increased Taxes Next Year
Now that President Barack Obama has won re-election, what tax increases should you expect next year and how can you prepare your family for an onslaught of new tax increases and additional tax hikes in 2013?
The most important advice I might throw out there immediately is to start preparing now for anything. Plan and implement NOW or at least plan and prepare mentally and emotionally now so you can implement changes needed when you see the additional costs literally at your door. Even if you don’t make changes now but know what you will do, you’ll be at a better starting point when the new taxes, costs, and fees come due.
The second piece of wisdom I can offer is to do what you can and then put it all in God’s hands to help your family get through the difficult years ahead. Remember, God will not give you more than you can handle. You might not really like what you HAVE to handle, but accept it as life and remember that all you really need is Christ Jesus anyway. With that attitude and focus, nothing can come your way where you don’t have what is the most important thing of Life anyway.
Lastly, keep in mind that while this is what we all have in store now, you can always be in prayer that something will change for the better, that perhaps some other politicians will intervene and cause something different to happen or that God Himself will intervene with the president and change his mind.
Probably what is more likely though, now that President Obama has been re-elected and these taxes represent what he wants and has planned to do, your prayers for wisdom as to what to do and strength to get through it will be your best best.
As I was reading this CBS article Obama win: What it means for your tax bill, I was able to quickly list a couple of things to watch and prepare for.
The handy little list below, based on what I read from that article, doesn’t cover ALL the different tax increases and doesn’t cover additional tax increases from the loss of the Bush tax cuts which President Obama wants to let go, (an additional couple thousand or so more in taxes per family if I understand that correctly, see below), but it gives you an idea of what general increases you’ll see coming up and what you, with your family, need to start preparing for.
What the Obama win and extra taxes needed to pay for Obamacare Health Care Law means for your taxes next year
New or additional tax increases for all families next year:
Poor to low income working class:
1. Loss of Earned Income Tax Credit
2. New 2% tax on all income up to $110,000 and no exempted taxable income on even on the lowest income earners (That means if you earn money at all, you will have to pay taxes on it and even the new higher tax rate on it now. All others with any higher income who are used to paying taxes on income will be paying 2% more.)
Middle class wage earners:
1. 3% tax increase on wages earned
2. 5% tax increase on capital gains
High wage earners (over $200,000/year per individual or $250,000 per year income for a married couple)
1. Up to 6% tax increase on wages
2. 3.8% increase on capital gains
3. Approximately a 20% tax increase on estate taxes
Again as clarification, the above tax increases cover only the cost of some of the general tax increases which will be used to help subsidize Obamacare.
Other general and/or Obamacare-related tax hike subsidies to prepare for in 2013:
Some other specific Obama tax increases can be viewed here: http://www.foxnews.com/opinion/2012/07/05/five-major-obamacare-taxes-that-will-hit-your-wallet-in-2013/
Also, here are 18 more Obama tax hikes which you need to be aware of before you begin your family budget planning:
Obamacare’s 18 New Tax Hikes for 2013: http://blog.heritage.org/2012/08/20/obamacares-18-new-tax-hikes/
The direct Obamacare costs you need to understand are there, know about, and prepare for:
The taxes listed above are general tax increases and hikes to the general public to help subsidize federal costs for Obamacare and related federal programs and do NOT include the direct costs of Obamacare which will affect you if you:
1. Own a business with any employees, are self employed,
2. Are an employee and your employer chooses to pay a tax penalty in lieu of purchasing an insurance policy for you.
I’ll try to explain in my very simple thinking what the Affordable Health Care Act will cost directly you above and beyond the general tax increases and hikes, and then I’ll post the actual law so you can verify what I’ve said or see more to understand it better.
Understanding the direct costs of Obamacare to those who employ others (bosses / small business owners / companies that employ workers):
If you own a business (small businesses included) and employ workers, the first decision to “accept or decline” the purchase of mandatory-by-law health insurance coverage for all Americans goes to you.
You will either now need to purchase a private health insurance policy for your employees, OR purchase the federally run public / federal insurance policy at a cost, OR accept a tax penalty which then passes the burden of the mandatory health insurance coverage or denial with a tax penalty to your employee.
This third option of employers and small business owners paying a penalty to NOT cover their employers and passing that mandate onto their employees is what I hear most companies and small businesses plan on doing.
Don’t forget yourself and your family members in the equation either! You are as required now by law to purchase a policy or pay a tax penalty for each of your family members to be uninsured too, even if you ARE the business owner!
The direct Obamacare costs for employers and small business owners are essentially as follows:
Choice 1: Purchase private insurance for employees and families: Prices Vary
Choice 2: Purchase a federally-managed health insurance policy for your single individual employees or employees with families: $10,200 per year per individual or $27,500 per year for an employee with a family up to four in number.
Choice 3: Pay a tax penalty instead of purchasing any kind policy for employees: About $2,000 per year per hire, phasing in first at around $700 per year per hire for two years, then rising after the phase in time to the $2,000 per year per hire rate, THEN rising accordingly afterwards as health care and government costs rise.
For the above, read here: Now That Obamacare Has Passed, Here’s What It’s Going To Cost You
Read here too: http://www.obamacarewatch.org/primer/employer-mandate
The direct costs of Obamacare for employees (workers) and their families if a boss pay the tax penalty instead of purchasing health care for them:
If your employer chooses to purchase a health care policy, private or federally-managed, instead of paying an optional tax penalty, or if you already have, and will continue to have, an employer-provided health care plan, you family will only need to deal with the general tax increase, tax hikes, and increases in premiums and costs over what you have been paying.
If your employer chooses to pay the tax penalty, the burden of purchasing a health insurance policy for you and your family will fall upon you then.
However, do understand you also have the choice to pay the same tax penalties as your boss does, paying a tax penalty instead and remaining uninsured. To do so though, you’ll need to pay the tax penalty to BE uninsured.
Direct Obamacare costs to you as an individual (employee) when your boss pays a penalty instead of purchasing insurance for you and your family members:
Choice 1: Purchase a private health insurance policy for you and your family members: Cost Varies
Choice 2: Purchase a federally-managed health insurance policy for yourself if you are single at a cost of $10,200 a year or $27,500 a year if you are married and/or have a family.
Choice 3: Pay the same tax penalty as your employee did to just be totally unemployed. That tax penalty cost is set at $2,000 per person per year to be uninsured, cost to be phased in as above.
If you are wondering… Yes, that does mean BOTH employer and employee will need to pay a tax penalty for you to be uninsured, and you and your family will then remain without a health care policy but at least legally so since the federal government allows for you pay a tax penalty and remain uninsured.
The “mandate”, in other words, mandatory requirement, that you have a health insurance policy will be legally offset and forgiven by the government by your payments of additional taxes to be uninsured. Remember this though… While you will be legally all right with not being covered, you WON’T be covered.
To see more about the mandatory requirement to purchase health insurance or pay a tax penalty to remain uninsured, and the provision for the employee or small business owner to pay the tax penalty which then transfers the insurance purchase or penalty to the employee instead, read the Obamacare legislation.
If you haven’t read the actual law and health care requirements for employers, small business owners, and private individuals and would like to see the actual law for the Affordable Health Care Act, you can see all that here:
See the Affordable Health Care Bill pdf /Obamacare Health Care Bill pdf here:
The additional tax increases you’ll experience when the Bush Tax Cuts are eliminated:
The additional burden your family may not have to deal with if President Obama and the current Congress can be convinced otherwise but which, at the time, the president favors is the elimination of the tax cuts that went into effect during the George W. Bush era.
There are several tax increases that will occur if the “Bush tax cuts” as most call them are eliminated including some of the following:
- The marriage tax penalty will be reinstated.
- The child tax credit will be cut in half for each child you have
- Itemized deductions will be cut in half
- Additionally, there are approximately 70 other tax cuts which will be eliminated, raising your family’s tax burden depending on how many affect you family specifically.
While I obviously can’t give you specifics in this area since there are so many variables here, all variables dependent on your individual family, here is a good overview of the tax cuts that will be eliminated and consequent tax increases you will see come January 2013 unless President Obama and Congress change our current route:
An Overview of Tax Provisions Expiring in 2012 by the Congressional Research Service
What can you do with the financial information you have now? How can you prepare your family for tax increases?
I hope the information and links I have provided help you and your family as you plan for the additional burdens of increased taxes next year and the immediate years beyond.
My intention was not to dismay although thinking of all the additional costs could make anyone feel a little down, some perhaps even more than others since some may already be financial strapped.
My desire here though is to give you some information you deserve to know before the time comes and to give you some encouragement that you can prepare enough for the changes to make a big difference.
As you know and as I mentioned above, the best thing you can do is to pray. You know, God can do a whole lot of things we can’t understand. He really can!
Then begin to figure out what you can do to deal with the increased costs which are coming to you and your family.
Roll things around in your brain. Question yourself and question yourself again to see if you can do without something if you really HAD to. Be prepared to cut out some expenses if need be, even if some of those items or services might be hard to give up.
Make a decision now that you learn how to save money, and start planning on how you’ll do that. You can save money on groceries (start now finding thrifty recipes and have a cookbook of good, cheap recipes and prepared meal plans); read up on how to save money on electricity or water; even research cheap recreational activities or alternatives in your family’s normal day to day events.
Even learning how to make a budget, if you don’t know already, will go a long way. Additionally, accepting a budget that is within your means, whatever that “means” will next year will be a very important step to getting through hard economic times. A tight budget will be a blessing if it helps you get through tight times.
You can get through difficult financial times, but having an understanding of what you’ll be facing next year and having a prepared household ready to go during those hard economic times will make getting through those times a little easier for you all.
Prepare your family for financial struggles, but stay optimistic and hopeful if only FOR your family. You can make it through with teamwork and God’s grace.
God’s blessings upon you all as we work through life together.
*Please note the above information does not include any additional tax hikes or increases the President and Congress may or may not agree on in an effort to deal with the debt crisis after the November 6 election and before January 2013.