January 4, 2013
The above captioned Act was passed by both houses on January 1, 2013, averting the much ballyhooed “fiscal cliff.” It became law on January 2, 2013.
SUMMARY – ATRA extends the Bush era tax rates, and provides as follows:
- A 39.6% tax rate, (up from 35%) for incomes above $400,000 for individuals, $425,000 for heads of household, and $450,000 for married persons filing jointly.
- The 2% Social Security reduction is gone, and the employer Social Security tax rate increases to 6.2% with an additional Medicare tax for earnings over $200,000.
- A permanent AMT adjustment for inflation is enacted retroactive to 2012.
- The maximum capital gains tax will raise from 15% to 20% for individuals taxed at the 39.6% rate (those making $400,000, $425,000, or $450,00, depending on filing status).
- The itemized deduction and personal exemption phase-outs will be reinstated, with different Adjusted Gross Income starting thresholds, adjusted for inflation as follows: $300,000 for those married persons filing jointly, $275,000 for heads of households, and $250,000 for single persons.
- Personal tax credits, such as the $1000 child tax credit, the enhanced Earned Income Tax Credit, and the American Opportunity Tax Credit are extended through 2017.
- The following other personal deductions and exclusions are extended through 3013:
Discharge of the qualified principal residence exclusion,
The $250 above the line teacher deduction,
Treatment of mortgage insurance premiums as residence interest,
Deduction for state and local taxes,
Above-the-line tuition deductions, and
The IRA-to-charity exclusion, plus special provisions allowing transfers made in January 2013 to be treated as made in 2012.
- The research credit and the production tax credits will be extended through 2013, with other such credits.
- For qualified real property, the 15 year depreciation and §179 expensing will be allowed on qualified real property through 2013.
- The Work Opportunity Credit is extended through 2013.
- Bonus depreciation is also extended through 2012.
- The §179 deduction limitation is $500,000 for 2012 and 2013.
- The Estate Tax regime will continue to provide an inflation adjusted $5,000,000 exemption, but will be applied at a higher 40% tax rate, up from 35% in 2012. Effectively, this means a $10,000,000 exemption for married couples.
For a detailed statement of the bill, see: CCH (Commerce Clearing House) website document: LINK