Fiscal Cliff Avoided

Fiscal Cliff Avoided

On January 2, 2013, President Obama signed into law the 2012 American Taxpayer Relief Act. This avoided the tax side of the “Fiscal Cliff”.

Highlights of the major provisions include:

  • Individuals with income over $400,000 and joint filers over $450,000 will pay more taxes in 2013 because of a higher 39.6% income tax rates and a 20% maximum capital gains tax;
  • The AMT has been patched for 2012 and subsequent years. All now refundable credits are allowed to the full extent of the taxpayers regular and AMT liability;
  • Itemized deductions are limited for high earners;
  • Personal exemptions are phased out for high earners;
  • The maximum estate tax rate is 40% with inflation adjusted 5 million dollar exclusion;
  • Portability between spouses regarding their unused exemption amount has been made permanent;
  • Retroactively extend tax provisions such as the research credit;
  • Provides 50% bonus depreciation for qualified property placed in service, in years 2013 and later;
  • The Act does not extend the 2% point cut in payroll and self-employment taxes;
  • It does not repeal any newly effective Medicare taxes.

To read the full overview, please click here.