Experts recommend Americans trim cost after paycheck cuts - Action News 5 - Memphis, Tennessee

Experts recommend Americans trim cost after paycheck cuts

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MEMPHIS, TN -
(WMC-TV) - America may have averted the fiscal cliff, but you'll see a smaller paycheck this month. 
 
That Payroll Tax Holiday we've had for the last two years ended when the ball dropped at midnight January 1.

Money experts recommend you trim costs to the tune of two-percent of your income.
     
We didn't plunged over the fiscal cliff after Congress voted to increase taxes on the wealthiest Americans to block the fall.

But we do have one foot hanging over the edge, now that a certain holiday is over.

"The Payroll Tax Holiday. That's going away.  It's gone," said Liberty Tax Service Franchise Owner Mike Conway. 

Conway said the feds lowered the payroll tax rate in 2011 from 6.2% to 4.2% to allow people to keep more cash in their pockets.

"It was called a Payroll Tax Holiday, and it was when our economy went to pot two years ago - and they tried to come up with ways to stimulate the economy," he said. 

But now, that the economy is recovering and the fiscal cliff was averted, Uncle Sam will get back to collecting.

"A two percent increase in the Social Security and Medicare tax that was being withheld from your paycheck. So, your paycheck is going down by two percent," said Conway.

"They will be raised on single individuals making $400,000 dollars, couples over $450,000."

Here's an overview of what changes now:

     For everyone, the 2% tax holiday ends.
  •      On individuals making more than $400,000 dollars or couples making more than $450,000, income taxes increase from 35 percent to 39.6 percent.
  •      For those making less, no change
  •      Also for those making more money, capital gains taxes will increase from 15 to 20 percent
  •      And for those making less money, investment tax rates remain at 15 percent or less
Money experts recommend you make immediate spending adjustments by trimming your budget two percent.
     
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