Individual Tax Rates
All the individual marginal tax
rates are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6%
is imposed on taxable income over $400,000 for single filers, $425,000 for
head-of-household filers, and $450,000 for married taxpayers filing jointly
($225,000 for each married spouse filing separately). These changes are
considered permanent.
Phaseout of itemized deductions and
personal exemptions
The personal exemptions and itemized
deductions phaseout is reinstated at a higher threshold of $250,000 for single
taxpayers, $275,000 for heads of household, and $300,000 for married taxpayers
filing jointly.
The phaseout for itemized deductions
reduces total itemized deductions by 3% of excess income over the above
threshold amounts.
The personal exemptions phaseout
reduces personal exemptions by 2% of the total exemptions for each $2,500 of
excess income over the above threshold amounts.
Capital gains and dividends
The 15% capital gain rate is
retained except a 20% rate now applies to capital gains and dividends for
individuals reaching into the 39.6% bracket mentioned above. The 0% rate
is retained to the extent income falls below the top of the 15% income tax
bracket – projected for 2013 to be $72,500 for joint filers and $36,250 for
singles.
Alternative minimum tax
The exemption amount for the AMT on
individuals is permanently indexed for inflation. For 2012, the exemption
amounts are $78,750 for married taxpayers filing jointly and $50,600 for single
filers. Relief from AMT for nonrefundable credits is retained.
Estate and gift tax
The estate and gift tax exclusion
amount is retained at $5 million indexed for inflation ($5.12 million in 2012),
but the top tax rate increases permanently from 35% to 40% effective Jan. 1,
2013. The estate tax “portability” election, under which, if an election is
made, the surviving spouse’s exemption amount is increased by the deceased
spouse’s unused exemption amount, was made permanent by the act.
Miscellaneous individual extension
provisions
- The American opportunity tax credit for qualified tuition and other expenses of higher education will now run through 2017.
- The following are retroactively patched to 2012 and extended one year through 2013:
· Deduction for up to $250 for elementary
and secondary school teachers
· Deduction of mortgage insurance
premiums as qualified residence interest
· Deduction for state and local sales
taxes paid in lieu of state and local income taxes paid
· Above-the-line deduction for up to
$4,000 of higher-education-related-expenses
· Exclusion from income for Qualified
Charitable Distributions from an IRA to a charity
Business tax extenders
- Extended through 2013 the credit for increasing research and development activities, which expired at the end of 2011
- Expensing amounts under Sec. 179 are changed to $500,00 for 2012 and 2013 with a $2 million investment limit
- Increased expensing amounts under Sec. 179 are extended through 2013
- The availability of an additional 50% first-year bonus depreciation was extended for one year and now generally applies to property placed in service before January 1, 2014
- The following were extended through 2013, and in some cases modified:
· The Work Opportunity Tax Credit was
extended through 2013
· 15 year straight-line cost recovery
for qualified leasehold improvements, qualified restaurant buildings and
improvements, and qualified retail improvements
· Temporary exclusion of 100% of gain
on certain small business stock
· Reduction in S corporation
recognition period for built-in gains tax
· For tax years beginning in 2012 and
2013, the S corporation recognition period for built-in gains tax is reduced to
5 years
Energy tax extenders
Extends and in some cases modifies
the following energy credits that expired at the end of 2011:
- Credit for energy-efficient existing homes
- Cellulosic biofuel producer credit
- Incentives for biodiesel and renewable diesel
- Credits with respect to facilities producing energy from certain renewable resources
- Credit for energy-efficient new homes
- Alternative fuels excise tax credits
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