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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. --David
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David S. Meyers, CFP®
http://www.MeyersMoney.com
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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?
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JoeTaxpayer
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.
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David S. Meyers, CFP®
http://www.MeyersMoney.com
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David S Meyers CFP
Very nice. Thanks, Dave. I like some of the details of the legislative history on there, too.
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.
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David S. Meyers, CFP®
http://www.MeyersMoney.com
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David S Meyers CFP

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