Today TaxMama® hears from Spidell Publishing Inc. at www.caltax.com with the latest news on the fiscal cliff legislation.
Spidell sent out this summary at midnight News Years Day after a long, combative session in the House of Representatives. According the Los Angeles Times, we almost ended up with no legislation. These are some of the provisions included in The American Taxpayer Relief Act of 2012, which the President is expected to sign.
Tax rates beginning January 1, 2013
A top rate of 39.6% (up from 35%) will be imposed on individuals making more than $400,000 a year, $425,000 for head of household, and $450,000 for married filing joint.
2% Social Security reduction gone
AMT permanently patched
A permanent AMT patch, adjusted for inflation, will be made retroactive to 2012.
Dividends and capital gains
The maximum capital gains tax will rise from 15% to 20% for individuals taxed at the 39.6% rates (those making $400,000, $425,000, or $450,000 depending on filing status, as noted above).
Itemized deduction and personal exemption phase-outs
The Pease itemized deduction phase-out is reinstated, and personal exemption phase-out will be reinstated, but with different AGI starting thresholds (adjusted for inflation): $300,000 for married filing joint, $275,000 for head of household, and $250,000 for single.
The estate tax regime will continue to provide an inflation-adjusted $5 million exemption (effectively $10 million for married couples) but will be applied at a higher 40% rate (up from 35% in 2012).
Personal tax credits
The $1,000 Child Tax Credit, the enhanced Earned Income Tax Credit, and the enhanced American Opportunity Tax Credit will all be extended through 2017.
Other personal deductions and exclusions
The following deductions and exclusions are extended through 2013:
And remember, you can find answers to all kinds of questions about tax legislation and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
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