We are into the full swing of tax season 2013 and the IRS is finally accepting tax returns electronically. Some forms are not ready to be filed yet electronically so those folks will still have to wait a little longer to file.
There is still a ton of talk in Washington about what to taxes to raise or cut and what expenses to cut or reform. Unfortunately, it is mostly talk and little of the focus is where is should be, on job creation. It is interesting to know what tax breaks will cost the USA the most over the next 5 years, and below is a list of the top 10 biggest tax breaks!
| Top 10 biggest tax breaks | Cost to federal coffers from 2013-2017 |
|---|---|
| Exclusion for work-based health insurance | $760.4 billion |
| Retirement savings breaks | $708.6 billion |
| Reduced rate on capital gains, dividends | $616.2 billion |
| Mortgage interest deduction | $379.0 billion |
| Earned Income Tax Credit | $325.9 billion |
| Child tax credit | $291.6 billion |
| State and local tax deductions | $277.6 billion |
| Tax deferral on foreign subsidiary income | $265.7 billion |
| Exclusion of capital gains at death | $258.0 billion |
| Charitable contributions | $238.8 billion |
(Source: The JCT, Senate House joint committe on tax and the USA Today)
It is also important to know how the payroll tax affects our paychecks for 2013. The 2% savings on the employee portion of the payroll tax expired at the end of 2012, so an individual making $50,000 per year will pay $1,000 more in 2013 for payroll tax, with a max amount increase of $2,274 for those making more than $113,800. This tax was cut form 6.2% to 4.2% as part of the stimulus package and it was never meant to be a permanent tax decrease.
Win Damon and I review this topic on our weekly podcast below on WNBP Radio FM 106.1 in Newburyport!