Fiscal Cliff Averted

Kemper CPA

Fiscal Cliff Averted – What That Means for Your Taxes
Congress passed a last-minute resolution to the tax issues that were looming over the fiscal cliff. The legislation, “American Taxpayer Relief Act of 2012” contains a number of provisions that can impact your tax situation.
Here is a sample of the new legislation:
• Permanently extended the Bush-era income tax rates for individual taxpayers with income under $400,000, heads of household with income under $425,000, and married couples filing jointly with income under $450,000. Income above those thresholds will be taxed at 39.6%.
• Raised the top rate for capital gains and dividends to 20% to the extent the taxpayer’s income exceeds the thresholds set for the 39.6% rate (see above bullet point).
• “Patched” the alternative minimum tax (AMT) for 2012 and beyond with 2012 exemption amounts set at $50,600 for single taxpayers and $78,750 for married couples filing jointly. The amounts will be adjusted annually for inflation.
• Limited itemized deductions and personal exemptions for single taxpayers with adjusted gross income exceeding $250,000 ($300,000 for married couples filing jointly).
• Permanently set the estate and gift tax exemption at $5,000,000 and the top rate at 40%. The exemption amount will be adjusted annually for inflation.
• Increased first-year expensing for business equipment to $500,000 with a $2,000,000 investment limit for 2012 and 2013. 50% bonus depreciation is extended through 2013.
• Reinstated for 2012 and 2013 the educator expense deduction, the optional deduction for state and local sales tax, the deduction for college tuition and fees, and the income exclusion for charitable distributions from IRAs for older taxpayers.
• Permanently extended the $1,000 child tax credit for dependents under the age of 17.
• Extended the American Opportunity Tax Credit through 2017. The credit is equal to 100% of the first $2,000 of qualified tuition and 25% of the next $2,000 in qualified expenses, for a maximum credit of $2,500 the first four years of a student’s college education.
Additional provisions of the legislation may also impact your tax and business situation. Contact Kemper CPA Group LLP for more information.

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