Yesterday, President Obama signed the 157 page American Taxpayer Relief Act of 2012 or "Fiscal Cliff Deal" into law. What does it mean for us? Here are the highlights:
1. Most of the "Bush Era" tax cuts have become permanent.
2. Unemployment benefits have been extended for an additional year.
3. The employee's payroll tax (or withholding) will increase 2% over the 2012 rate for most wage earners.
4. The individual income tax rate from 2012 will remain the same for single filers making under $400,000.00 per year ($450,000.00 per couple filing jointly). For those with incomes above this threshold, the tax rate will rise to 39.6% from 35%.
5. For those in the 39.6% tax bracket, the rate on long term capital gains and dividends increases to 20% from the 2012 rate of 15%.
6. The Estate Tax on amounts over the exemption ($5 Million in 2013, to be inflation adjusted going forward) will increase to 40% over the 2012 rate of 35%, thus increasing the importance of your Estate Tax strategy.
What the Fiscal Cliff Deal did not substantially deal with are the automatic spending cuts that resulted from the last round of congressional negotiations. The automatic spending cuts have been delayed until the end of February, 2013. This means that the stage has been set for another congressional battle over the issue of spending, and probable market turbulence created by the uncertainty.
- Thomas Georgianna, Associate Attorney
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