A Short Summary of Fiscal Cliff Deal 2013

Topics: Taxation in the United States, Taxation, Tax Pages: 3 (911 words) Published: May 2, 2013
In order to finance the Civil War, the Federal Govt enacted the first federal income tax in 1861 which resulted in the 16th amendment to the Constitution in 1913. FISCAL CLIFF DEALS, IMPORTANT PROVISIONS, NEW TAX RATES

The 157 – page American Taxpayer Relief Tax Act Of 2012 aka “fiscal cliff” is a result of The Bush-era tax cuts that was scheduled to expire on Dec. 31, 2012. The tax cuts benefited nearly every American taxpayer, though they offered the most generous benefits to the wealthiest Americans. Congress permanently extended tax rates on income below $400,000 for individuals and $450,000 for couples, but raised the income tax rate to 39.6% from 35% for the taxpayers whose income is above $400,000 for individuals and $450,000 for couples. It also raised the rate on capital gains and dividends from 15 percent to 20 percent for income above the same threshold. Bush-era rates become permanent for middle-class taxpayers, while tax rates rise for a group roughly corresponding to the wealthiest 1 percent of households. Forbes Senior Editor Deborah L. Jacobs explains Estate and Gift Tax - Under the 2010 tax law, we can each transfer up to $5 million tax-free during life or at death. That figure is called the basic exclusion amount, and it is adjusted for inflation. On Jan 11, IRA announced that, with the inflation adjustments its $5.25 million for 2013. If you exceed the limit, you (or your heirs) will owe tax of up to 40%. The 2010 tax law gave married couples a wonderful tax break, which the new law has made permanent. The prerequisite is filing an estate tax return when the first spouse dies, even if no tax is owed within nine months after death with a six month extension allowed. The couples get a special break: they can share the basic exclusion during life and give more to the kids now, tax-free. There are lifetime gifts that don’t count; we can each give another person $14,000 per year...
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