1. Tax deductions get thrown over "cliff"
   

   CBS News ‎- 2 hours ago

   Certain parts of the new law that avoided plunging U.S. off "fiscal cliff" could catch some taxpayers by surprise.

   
   

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   Larry Swedroe /

   MoneyWatch/ January 4, 2013, 1:55 PM

   Tax deductions get thrown over "cliff"

   

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   News Analysis
   (MoneyWatch) Although most of the tax changes under the congressional deal this week to avoid plunging the U.S. economy off the "fiscal cliff" were expected, one key provision may catch some taxpayers by surprise: The phaseout of itemized deductions and the reinstatement of so-called Pease limitations.
   That change will affect not only single filers with annual income of more than $400,000 ($450,000 for households), who this year will face a higher marginal tax rate, but also higher-earning people whose income falls below the top bracket.
   The measure, which President Obama signed law on Thursday, affects deductions in two ways, both having to do with previously suspended limitations now being reinstated.
   

   • How the "fiscal cliff" is affecting the markets
   • What the "fiscal cliff" means to taxpayers
   • Fiscal cliff: Middle class the big loser?

   Personal exemption phaseouts
   Upper-income taxpayers subject to the itemized deduction phaseout and the Pease limitation, which the Obama administration backed as a way to limit charitable deductions, are as follows:
   
   

   • $300,000 for joint filers and a surviving spouse
   • $275,000 for heads of household
   • $250,000 for single filers
   • $150,000 for people married, filing separately

   Under the change, the total amount of personal exemptions for people at these income levels is reduced 2 percent for every $2,500 in adjusted gross income over the threshold. In addition, these dollar amounts are adjusted for inflation for tax years after 2013.
   For instance, take a single-filer making $260,000 in adjusted gross income. The value of the personal exemption for the 2012 tax year is $3,800. Because this filer is $10,000 over the income threshold, the value of his personal exemption would fall 8 percent, or $304.
   The phaseout had originally been suspended as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001. The suspension was extended for two more years thanks to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
   Pease limitations
   On the other hand, Pease limitations (named after a late Ohio lawmaker who sponsored legislation to change the tax code), affect those high-earners filing itemized deductions. Their deductions are reduced by 3 percent of the amount of adjusted gross income over the limitation. As with the personal exemption phaseout, dollar figures are adjusted for inflation.
   Using the example above of a single taxpayer with adjusted gross income of $260,000, being $10,000 over the threshold means his itemized deductions would be reduced by $300, or 3 percent of $10,000. It's important to note that the reduction would be capped at 80 percent of total itemized deductions.
   Like the personal exemption phaseout, the 2001 tax act eliminated the Pease limitation entirely, and the 2010 tax act extended the suspension two more years.
   Taxpayers who think they may be affected by the provisions should consult a tax adviser.

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   Tax deductions get thrown over "cliff"

   
   

   In reading this I now believe this is the most fundamental change to how the U.S. conducts it's financial business possibly in my lifetime at least since the 1970s. 

   
   

   So, fundamentally, what America is and will be has changed and the "Unintended Consequences" of this will be horrific for extended family members and charitable organizations and horrific in various other ways. However, it will not be as bad as going over the cliff without any legislation.

   
   

   "It's the (financial) end of the world as we know it" and that will be more obvious to everyone in the next couple of years when they deal with the real nightmare of this and whether they can financially survive this at every income level or not?
   
   The people I actually feel the most sorry for are those who might not be able to afford to hire someone to study this for them to help them survive this better.