Ultra-Short summary of American Taxpayer Relief Act

As posted to my worpress blog at

Ultra-Short Summary of American Taxpayer Relief Act of 2012 (HR8 as
amended by the Senate)
American Taxpayer Relief Act of 2012 (HR8 as amended by the Senate)
The first two items below directly nearly every taxpayer.  The third
affects anyone with earned income, and the fourth affects every married
couple.  The rest are much narrower in scope (ie. highest income folks,
large estates, etc):
All Bush-era tax rates made *permanent* (10, 15, 25, 28, 22, 35%
brackets).  New 39.6% bracket starting at 400/450,000 (s/mfj) of
*taxable income* (not AGI or MAGI).
15% dividend and cap-gains tax rates made permanent, 20% for Taxable
Income > 400/450.  20% rate applies to the extent that cap-gains and
dividends exceed the 400/450 cap.  (ie. if marrieds have $425 ord.
income, plus $100 div/capgains, then they pay 15% on the first $25 of
divs/capgains and 20% on the remainder.  Plus Obamacare taxes).
Temporary OASDI (SS tax) cut was allowed to expire.  For 2012, the
employee portion of social security taxes was cut to 4.2%.  It now goes
back to 6.2% on all earned income up to $113,700.  This affects
*everyone* with earned income.
Marriage Penalty relief ? basic MFJ standard deduction remains twice
the basic deduction for singles.  Similarly, the 15% bracket remains
twice the 15% single bracket.
Obamacare medicare tax on ?net investment income? still applies ? 3.8%
on investment income to the extent that taxable income exceeds $200/250.
AMT patch for 2012 increases 2012 AMT exemptions to $50,600/$78,750,
and for 2013 at $51,900/$80,750 ? and indexed for inflation in the
future so they don?t have to play the game of annual AMT patches.  AMT
has *never* been indexed to inflation automatically before, which is
why they had to pass a patch each year.
Revival of Pease and PEP
[Okay, there's more, including a detailed example of the Pease phaseout
of itemized deductions, on the site. Otherwise the thing just looks
too long to post here]
Of additional note:
Federal lifetime gift and estate tax exclusion stays at $5,000,000 and
permanently adjusted with inflation, with 40% rate above that.
IRA distributions direct to charity (discussed here previously)
extended for 2012 and 2013, but *not* made permanent.
And, of course, on the spending side, ?sequestration? has been delayed
by 2 months. (ie. can kicked down road just another touch. )
Naturally, I have not read the actual law. The above is all based on
notes from CCH Tax services, which were quite extensive and in vastly
greater detail than I address here, moreover, they cover a lot of
additional issues, particularly taxes that affect corporations and
businesses. I very highly recommend CCH's tax publications.
Reply to
David S Meyers CFP
"IRA distributions direct to charity are tax-free (rather than being income and then available as potential itemized deductions ? which would have meant higher AGI, other impacts)."
David - is this a permanent addition to the code? And is it retroactive to 2012?
Reply to
Sorry about the mangled formatting. Didn't realize how bad it is if I copy and paste in to the usenet software. I'll be happy to repost in entirety if anyone likes.
Reply to
David S Meyers CFP
Wikipedia, while not the best primary source (though most articles do have links *to* primary sources), is an amazing resource, and I'm often impressed at how fast it's updated. It gets dismissed by a lot of people, but I've found it's really surprisingly good.
Reply to
David S Meyers CFP

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