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American Taxpayer Relief Act of
2012
Fiscal Cliff Resolution




January 2013
Payroll Tax Increase



✤   Employee portion of medicare tax will rise to 6.2% of income

    ✤   (up from 4.2%)

    ✤   Due to payroll tax reduction expiration
Medicare


✤   Medicare Surtax

    ✤   0.9% on earned income once earnings exceed $200,000 ($250,000 if
        married filing joint, $125,000 if married filing separate)

    ✤   3.8% on net invested income for those with modified adjusted
        gross income over $200,000 ($250,000 if married filing joint,
        $125,000 if married filing separate)
Some Tax Cuts Made Permanent


✤   Tax brackets extended

    ✤   10%, 25%, 28%, & 33% tax brackets extended for certain taxpayers

✤   High income brackets

    ✤   For those making over $400,000 ($450,000 if married filing joint,
        $425,00 if head of household)

        ✤   Top tax bracket is now 39.6%
Itemized Deductions

✤   High income taxpayers may lose some deductions

    ✤   Generally,

        ✤   Loss will be reduced 3% of the excess of adjusted gross income
            over $250,000 ($275,000 for head of household, $300,000 for
            married filing joint)

        ✤   Loss of deductions cannot exceed 80% of itemized deductions

        ✤   Medical expenses, investment interest, casualty losses, gambling
            losses not included in deduction losses
Personal Exemption



✤   $3,900 per taxpayer & dependent for 2013

✤   Phased out for high income earners

    ✤   Reduced by 2% for each $2,500 of income over $250,000 ($275,000
        for head of household, $300,000 for married filing joint)
Capital Gains & Dividends


✤   15% rate extended for those making less than $400,000

✤   20% rate for high income earners (over $400,000 if unmarried, over
    $450,000 if married filing joint)

✤   Note: the top rate will be 23.8% when subject to the 3.8% Medicare
    surtax
Alternative Minimum Tax (AMT)



✤   Permanent resolution for AMT

✤   Previously, AMT had to be patched on an annual basis

✤   Exemption amounts will adjust annually on the basis of inflation
Other Extensions


✤   Child Tax Credit

✤   Marriage Penalty Relief

✤   Student Loan Interest Deduction

✤   Dependent Care Credit
Temporary Extensions

✤   American Opportunity Tax Credit

    ✤   Education credit, extended through 2017

✤   Mortgage Debt Relief

    ✤   Through 2013

✤   Deduction for state & local general sales tax

    ✤   Through 2013

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American Taxpayer Relief Act 2012

  • 1. American Taxpayer Relief Act of 2012 Fiscal Cliff Resolution January 2013
  • 2. Payroll Tax Increase ✤ Employee portion of medicare tax will rise to 6.2% of income ✤ (up from 4.2%) ✤ Due to payroll tax reduction expiration
  • 3. Medicare ✤ Medicare Surtax ✤ 0.9% on earned income once earnings exceed $200,000 ($250,000 if married filing joint, $125,000 if married filing separate) ✤ 3.8% on net invested income for those with modified adjusted gross income over $200,000 ($250,000 if married filing joint, $125,000 if married filing separate)
  • 4. Some Tax Cuts Made Permanent ✤ Tax brackets extended ✤ 10%, 25%, 28%, & 33% tax brackets extended for certain taxpayers ✤ High income brackets ✤ For those making over $400,000 ($450,000 if married filing joint, $425,00 if head of household) ✤ Top tax bracket is now 39.6%
  • 5. Itemized Deductions ✤ High income taxpayers may lose some deductions ✤ Generally, ✤ Loss will be reduced 3% of the excess of adjusted gross income over $250,000 ($275,000 for head of household, $300,000 for married filing joint) ✤ Loss of deductions cannot exceed 80% of itemized deductions ✤ Medical expenses, investment interest, casualty losses, gambling losses not included in deduction losses
  • 6. Personal Exemption ✤ $3,900 per taxpayer & dependent for 2013 ✤ Phased out for high income earners ✤ Reduced by 2% for each $2,500 of income over $250,000 ($275,000 for head of household, $300,000 for married filing joint)
  • 7. Capital Gains & Dividends ✤ 15% rate extended for those making less than $400,000 ✤ 20% rate for high income earners (over $400,000 if unmarried, over $450,000 if married filing joint) ✤ Note: the top rate will be 23.8% when subject to the 3.8% Medicare surtax
  • 8. Alternative Minimum Tax (AMT) ✤ Permanent resolution for AMT ✤ Previously, AMT had to be patched on an annual basis ✤ Exemption amounts will adjust annually on the basis of inflation
  • 9. Other Extensions ✤ Child Tax Credit ✤ Marriage Penalty Relief ✤ Student Loan Interest Deduction ✤ Dependent Care Credit
  • 10. Temporary Extensions ✤ American Opportunity Tax Credit ✤ Education credit, extended through 2017 ✤ Mortgage Debt Relief ✤ Through 2013 ✤ Deduction for state & local general sales tax ✤ Through 2013