Yahoo News asked readers to react to Washington's fiscal-cliff deal, forged late Tuesday night? Are they happy? Will they benefit? Here's how the agreement plays out for one American.
FIRST PERSON | Several aspects of income tax law were preserved and extended when the House of Representatives approved H.R. 8, the American Taxpayer Relief Act of 2012. Some of the provisions of the law directly help my family save money over the next two years and beyond. As father in his early 40s, the financial benefits of this package save us thousands of dollars a year with tax credits.
My daughter graduates from high school in May and then it's off to college. The tax package passed late Tuesday night includes a two-year extension of higher tax credits for qualified college tuition. Called the American Opportunity Credit, I can be credited with up to $2,500 per eligible student in college for tuition, enrollment fees and books.
In my daughter's case, $2,500 is half of her first-semester tuition to a local university here in southwest Missouri. Everything else is covered by grants, scholarships and some small loans. In essence, the extension of the tuition tax credits allows my daughter to attend college with very little, if any, expenses incurred from the family budget.
Child tax credits
With two children, getting extra money for taking care of them helps. Child tax credits used to be $500 per child but went up to $1,000 per dependent child with Bush-era tax cuts. Child tax credits were extended another five years in the fiscal cliff deal. Since both of our children will be dependent upon our income for the next year, we get to take an extra $1,000 in credits off our tax bill in 2014.
How the math works for me
Because the aforementioned benefits are tax credits as opposed to deductions, this money directly reduces our income tax bill. If my family's tax liability, after deductions and expenses, amounted to $1,000, then the tax credits total $4,500 in 2013. That makes our income tax refund in 2014 around $3,500. That's extra money we have in our hands that goes towards expenses, vacations or anything we want.
Better late than never
I'm glad Congress solved this issue, even if it puts off budget cuts and the debt limit for two months. The coming budget cuts may lead to rising unemployment, but hopefully lawmakers will deal with that without their typical last-minute drama. At least taxpayers got relief.