LITTLE ROCK, Ark. (KTHV) - "Fiscal Cliff" probably a term you've seen splashed over national news, but what exactly is it, and how will it impact people in Arkansas?
The fiscal cliff is basically fancy financial jargon for a laundry list of tax laws passed over the years that are all set to expire at the end of the year. To clue us in on some possible scenarios if things expire-and we emphasize "possible"-THV 11 News sat down with Little Rock Financial Consultant John Barnes for some perspective.
Number 1: Corporate Tax Deduction could go.
The corporate tax deduction that companies get for helping workers pay for medical care and their 401K is set to expire December 31st.
"That means the corporations may no longer want to offer that as a benefit, meaning you would have to pick up all your medical expenses and your 401K. You'd basically be on your own as far as contributions are concerned. There are no matches," Barnes said.
Number 2: The Child Tax Credit could go.
"If you have a child at home that is a dependent, the federal government allows you so much credit for the expenses of raising that child to deduct off of your federal income taxes," Barnes said.
Number 3: Home mortgage assistance could expire.
"If you are buying a home and paying a mortgage, that interest is deductible off your federal income tax return, that could go away," Barnes said.
Number 4: President Obama's Payroll Tax Holiday may end.
"Two percent savings on payroll taxes to help pay Social Security benefits in future, that one is expiring also," Barnes said.
Number 5: Federal deductions on local and state taxes may also end.
"When you file your return, you or your CPA, will deduct the amount of local sales tax and property taxes and other state taxes that you may pay, the federal government says you don't pay us tax on that, we'll allow you to deduct that from your income," Barnes said.
If there is no deal by the end of the year on all of the tax breaks, the White House reports that a family of four making $55,400 could see their income taxes go up by $2,200.
Barnes added that all of this is really up in the air until Congress reaches a deal, and the latest out of Washington Friday showed no compromise in sight yet between the Obama administration and the Republicans.