American Taxpayer Relief Act 2012

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The Fiscal Cliff resolution passed on the beginning of January 2013 will have a big impact on certain taxpayers starting in 2013.

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American Taxpayer Relief Act 2012

  1. 1. American Taxpayer Relief Act of2012Fiscal Cliff ResolutionJanuary 2013
  2. 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. 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. 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. 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. 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. 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. 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. 9. Other Extensions✤ Child Tax Credit✤ Marriage Penalty Relief✤ Student Loan Interest Deduction✤ Dependent Care Credit
  10. 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

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