*** Updated 1/2/2013 with the ‘Fiscal Cliff Deal‘, updates in italics ***
Cliff Deal Notes (Part Two) –
As promised, I’ve run the numbers on what the Fiscal Cliff (aka Sequestration, aka Taxmageddon) will cost Joe and Jane Sixpack.
There’s no chance of a deal being worked out by the lame duck Congress. Both sides are too far apart and there are too few work days left in the year. If you disagree with me, then I’ve got some arid mountain land to sell you in Florida. (Update 1/2/2013, I was right about the Year, but wrong about the lame duck congress not making a deal before the new congress being sworn in).
So it’s time to brace for impact. Crunching the numbers as promised, here are the assumptions:
- Mid-grade Federal Employee, married w/2 kids, living on the West Coast or an expensive area like Washington DC (this covers over half of active Federal Employees).
- Itemized deductions of $31,000 (reasonable assumption for areas with expensive mortgages).
- 4 exemptions claimed
- Annual Long Term Capital Gains of $8000.
- Annual Qualified Dividends of $2600.
- Health Care Flex Spending Account election of $5,000 in 2012 (capped at $2,500 in 2013).
Here are the calculations:
Holy Schnikes! Looks like I’ll be paying Uncle Sam another
$4k $3k next year for the same amount of work. Note that these calculations can apply to just about anyone in the current 25% marginal bracket- just knock of the anticipated 0.4 percent hike in FERS annuity contributions. (1/1/2013 Update Notes: still plenty of uncertainty about FERS contributions, still some uncertainty with the Executive Order-ed 0.5 percent pay increase for federal employees).
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