A note from Tax Principal Ellen Juram, CPA:

Congressional leaders struck a deal on New Year’s Eve that permanently maintains the Bush-era tax cuts for more than 99 percent of households, and President Obama signed it into law Wednesday.

Highlights of the American Taxpayer Relief Act of 2012 include:

  • The 10, 25, 28  and 33 percent income tax rates will become permanent. Individual taxpayers with income of more than $400,000 or married couples with more than $450,000 would be taxed at 39.6 percent, up from 35 percent.
  • The top capital gains and dividend rate would remain 15 percent for taxpayers below the $400,000/$450,000 thresholds and increase to 20 percent for those above the thresholds.
  • Exemptions and deductions will be limited for adjusted gross income over $250,000 (individual filers) and $300,000 (joint filers).
  • The estate tax exemption is set at $5.12 million and will be adjusted annually for inflation. The tax rate increases from 35 percent to 40 percent.
  • The Alternative Minimum Tax exemption is set at $50,600 for individuals and $78,750 for joint filers, and it will be adjusted annually for inflation.

The bill also extends valuable business tax credits and incentives, such as

  • the Research & Experimentation Tax Credit
  • Work Opportunity Tax Credit
  • Sec. 179 expensing
  • bonus depreciation
  • 100% exclusion of the gain on the qualified small business stock
  • and more

The American Taxpayer Relief Act of 2012 does not address some previously scheduled payroll tax increases, such as the Medicare surtax and Social Security tax. For more information on these or any other tax issues, contact a member of the Barnes Dennig tax team at (513) 241-8313.

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