Fiscal Cliff Avoided, Tax Plan ApprovedJanuary 04, 2013
Overview of the new tax plan relief extensions and increases.
On January first, 1, 2013, the Senate and House of Representatives passed a bill designed to avert wide-ranging tax increases and budget cuts scheduled to start with the new year. The bill, expected to be signed into law by the President, will raise taxes by approximately $600 billion over 10 years.
The bill also delays for two months mandatory budget cuts to the Pentagon and other federal agencies. The bill would prevent many of the tax hikes that were scheduled to go into effect this year while keeping many favorable tax breaks that were scheduled to expire at the end of 2012. At the same time, the bill increases income taxes for some high-income individuals and slightly increases transfer tax rates.
Below are some of the bill’s main provisions:
- Permanently extend tax rates for most Americans
- Higher tax rates for highest earners
- Personal Exemption Phase-out (PEP) limits apply to high-earners
- Itemized deduction limits apply to high-earners
- Capital gain and dividend rates rise for higher-income taxpayers
- Gift and estate tax provisions kept with slight rate increase
- Permanent AMT relief
- Payroll tax cut ends
Additional tax provisions: The bill contains additional tax provisions that affecting both business and individual taxpayers. Among them are:
- Marriage penalty relief
- Bonus depreciation extension
- American Opportunity Tax Credit (extended through 2017)
- Child tax credit
- Emergency Unemployment Compensation
- One year Doc fix for Medicare payment
- 401(k) Roth Conversions
Read Paul's full article on this topic titled “Tax Consequences of the Fiscal-Cliff Deal” for more information on the effect this legislation may have on you or your business.
There are additional individual and business provisions of the fiscal cliff bill that may apply to you or someone you know. For more information contact Paul Oliveira, Shareholder, and Director of KLR Tax Services Group.