The House and Senate approved a last-minute fiscal cliff bill (the American Taxpayer Relief Act of 2012) on Jan. 1, and the president signed it on Jan. 2. The act makes permanent most Bush-era tax cuts, returns the top rates to 39.6% for ordinary income and 20% for capital gains and dividends, and permanently indexes the alternative minimum tax (AMT) for inflation. It does not extend the 2 percentage point cut in payroll and self-employment taxes, and does not repeal or delay the new Medicare taxes or any other health care reform tax changes.
Grant Thornton’s Washington National Tax Office (WNTO) has dissected the act in the comprehensive analysis and snapshot documents below. In these videos, WNTO Partner Mel Schwarz discusses how the act will affect taxpayers and business owners and what tax issues will likely emerge in 2013.
The House and Senate approved a last-minute compromise on Jan. 1 settling most of the unresolved fiscal cliff tax issues and making permanent the 2001 and 2003 tax cuts on income under $400,000 for single filers and $450,000 for joint filers.
As you learn more about the details of the fiscal cliff legislation, keep these three key points in mind: 1. Taxes will be higher next year for high-income taxpayers, but they will increase in various ways and at various income thresholds. 2. After more than a decade of temporary fixes, we finally have permanent tax law in place on the alternative minimum tax, estate and gift taxes, and individual tax rates on investment and earned income. 3. The debate isn’t over, because the spending cuts under the “sequestration” are delayed for only two months and are scheduled to kick when Treasury is projected to reach its borrowing limit.