American Taxpayer Relief Act of 2012

On Jan. 2, Congress passed the American Tax Relief Act to address the fiscal cliff. The act makes permanent 2012 income tax rates for most taxpayers, as well as alternative minimum tax relief. It also extends many other breaks for individuals and businesses. However, the fiscal cliff deal does result in some tax increases; here are three of the most significant:


1. Payroll taxes. The act doesn't extend payroll tax relief. So taxpayers with earned income will see a Social Security tax rate increase of two percentage points in 2013.


2. Income taxes. Beginning in 2013, taxpayers with taxable income that exceeds $400,000 (singles), $425,000 (heads of households) or $450,000 (married filing jointly) will face a marginal tax rate of 39.6% (up from 35%) and a long-term capital gains rate of 20% (up from 15%).
 
3. Estate taxes. While the $5 million (indexed for inflation) estate tax exemption has been made permanent, the top estate tax rate increases from 35% to 40% beginning in 2013.

For more information about the details of the legislation, here are several good resources and articles:

Journal of Accountancy article from 1/1/13 very good, concise summary

CCH Tax Briefing 11 pages, very detailed

ATRA Extended Provisions Detailed List from our fellow BDO Alliance firm Skoda Minotti's blog

Forbes article: Fiscal Cliff Tax Deal: What Does It Mean for Small Business?

As always, feel free to contact me at 803-753-5244 or tperricelli@scottandco.com with any questions about this legislation.