American Tax Payer Relief Act of 2012

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CCH Tax Briefing

American Taxpayer Relief Act of 2012
Special Report

January 2, 2013
HigHligHts
39.6% Tax Rate For
Incomes Above $400,000
($450,000 Families)
All Other Bush-Era Tax
Rates Extended
20% Maximum Capital Gains/
Dividend Tax Rate
Maximum 40% Estate/Gift
Tax Rate
Permanent AMT Patch
Five-Year Extension Of
Enhanced Education Credit
One-Year Extension Of Many
Business Tax Extenders
Over 30 Extenders Retroactive
To Start Of 2012

iNsiDE
Individual Income Tax Rates ........................1
Capital Gains/Dividends Sunsets .............. 2
Permanent AMT Relief................................. 3
Pease Limitation ........................................... 4 Personal Exemption Phaseout ................... 4
Federal Estate, Gift And GST Taxes ........... 5
State And Local Sales Tax Deduction ....... 6
Child Tax Credit ............................................. 6 Earned Income Credit .................................. 6
Other Child-Related Tax Relief .................. 6
Other Education Incentives........................ 7
More Individual Tax Extenders ................... 8
Business Tax Provisions ............................... 8
More Business
Tax Extenders .............................................. 10 Energy Incentives........................................ 10 Affordable Care Act .....................................11

Congress Approves Eleventh-Hour
Agreement to Avert Fiscal Cliff

T

he tax side of the “Fiscal Cliff”
has been averted. The U.S. Senate overwhelmingly passed legislation to avert the so-called fiscal cliff on January 1, 2013 by a vote of 89 to 8, sending the American Taxpayer Relief Act of 2012 (HR 8, as amended by the Senate)

to the House, where it was similarly approved on January 1, 2013 by a vote of 257 to 167. The American Taxpayer Relief
Act allows the Bush-era tax rates to sunset
after 2012 for individuals with incomes
over $400,000 and families with incomes
over $450,000; permanently “patches” the
alternative minimum tax (AMT); revives
many now-expired tax extenders, including the research tax credit and the American Opportunity Tax Credit; and provides for a maximum estate tax of 40 percent
with a $5 million exclusion. The bill also
delays the mandatory across-the-board
spending cuts known as sequestration.
President Obama said that he will sign this
legislation as soon as it reaches his desk.
iMPACt. Individuals

with incomes
above the $450,000/$400,000 thresholds will pay more in taxes in 2013 because of a higher 39.6 percent income tax rate and a 20 percent maximum
capital gains tax. Nevertheless, all taxpayers will find less in their paycheck in 2013 because of what the American
Taxpayer Relief Act did not include: the
new law effectively raises taxes for all
wage earners (and those self-employed)
by not extending the 2012 payroll tax
holiday that had reduced OASDI taxes from 6.2 percent to 4.2 percent on earned income up to the Social Security
wage base ($113,700 for 2013).

I MPACT. The American Taxpayer Relief
Act avoids draconian automatic sunset
provisions that were scheduled to take
effect after 2012 under the Bush-era
tax cuts in the Economic Growth and
Tax Relief Reconciliation Act of 2001
(EGTTRA) and the Jobs and Growth
Tax Relief Reconciliation Act of 2003
(JGTRRA) (both as extended by subsequent legislation, including the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act). Without
the American Taxpayer Relief Act, individual tax rates on all income groups would have increased, taxpayer-friendly
treatment of capital gains and dividends
would have completely disappeared, the
child tax credit would have plummeted
to $500, enhancements to education tax
incentives would have ended, the federal estate tax would have reverted to a maximum rate of 55 percent, and many
other popular but temporary incentives
would no longer be available....
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