Jan 7, 2013

Summary of The Fiscal Cliff Deal

The results are in.....
It was a soap opera but Congress did pass the American Taxpayer Relief Act of 2012 aka Fiscal Cliff Deal. The American Taxpayer Relief Act of 2012 was passed by the United States Congress on January 1, 2013, and was signed into law by President Barack Obama the next day. Highlights of the bill include:

  • Permanent Alternative Minimum Tax (AMT) patch, adjusted for inflation. This will protect 30 million taxpayers from AMT liability.
  • Preservation of the Bush-era tax cuts for individuals earning less than $400,000 (AGI) and families earning less than $450,000. Tax rates will increase from 36% to 36.5% for taxpayers above those income thresholds.
  • Preservation of the $5 million individual ($10 million per couple) exemption for estate taxes. Estate value above that threshold will be taxed at 40% rate, up from the current 35%.
  • Increase in the dividends and capital gains tax rate from 15% to 20% for individual taxpayers earning above $400,000 (AGI) and families earning above $450,000.
  • An end to the payroll tax holiday. The social security withholding rate is reset to its previous 6.2% rate on the first $113,700 in earnings for each individual taxpayer.
  • Extension of the $1,000 Child Tax Credit, the enhanced Earned Income Tax Credit, and the enhanced American Opportunity College tuition tax credit.

Now that the legislation has passed, the IRS can finalize forms and instructions and update its processing systems.  This is GREAT news for tax preparers! However, the IRS has not yet indicated if there will be delays in the start of electronic processing. Hey, I will take what I can get. I'm just glad that the drama is over...... at least for now.

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