As it has become clear that Congress will not vote on a deal in "fiscal cliff" negotiations by Monday's deadline, the automatic tax hikes and spending cuts that were scheduled to happen on Jan. 1 will come into effect starting tonight at midnight.
After ringing in the happy new year 2013, here are five ways falling off the fiscal cliff will affect your money:
- The alternative minimum tax patch just dissolved: For nearly 30 million middle-class American families, the alternative minimum tax is about to take a much larger bite of their income. Unless Congress passes a so-called "AMT patch" as part of a fiscal cliff deal, a household earning around $75,000 may pay as much as $3,700 more for their 2012 taxes.
- Everyone's income tax rates just went up: The Bush-era tax cut officially expired Monday at midnight. Now, without a deal, that means nearly every American taxpayer will have higher rates as they revert back to 2001 levels from current levels, an increase of several percentage points for most income tax brackets.
- Your paycheck just shrunk: Starting on January 1, most American workers will see smaller paychecks now that the payroll tax break has expired with the end of 2012. For Americans earning $50,000 in annual salary, that means a loss of around $80 per month to higher taxes, or around an extra $1,000 per year.
- Your tax refund will be delayed: Without a deal by Dec. 31, the IRS has said that tax refunds could be delayed for as many as 100 million taxpayers as the government agency scrambles to revise tax forms to reflect the changes post-cliff.
- Families earning less than $50,000 just lost tax credits: Among the tax credits that expired at the end of 2012 are several that help low- and middle-income families with kids. This includes the Earned Income Tax Credit, which was worth a maximum of almost $6,000 to some families. Now that the credits have expired, they will be capped at much lower limits starting in 2013, CBS reported.
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