Tax & Accounting Blog

Tax Impact of the Fiscal Cliff Legislation

Blog, Corporate Income Tax, ONESOURCE March 5, 2013

Congress passed legislation to address the impending tax increases and automatic spending cuts that were scheduled to begin in January 2013, commonly referred to as the “fiscal cliff.” Here are the key provisions of the fiscal cliff agreement, the American Taxpayer Relief Act of 2012:

  • Individual tax rates:  Permanent extension of current tax brackets on taxable income below $450,000/$400,000 (joint/single filers) and reinstates the 39.6% bracket for taxable income above $450,000/$400,000.
  • Pease limitations: Reinstated for filers with AGI above $300,000/$250,000.
  • AMT exemption: $78,750/$50,600 for 2012 and permanently indexed for inflation.
  • Capital gains and dividends: Permanent extension of 15% rate on capital gains and dividends for taxable income below $450,000/$400,000 and 20% rate on capital gains and dividends for taxable income above $450,000/$400,000.
  • Key business extenders include the research tax credit and bonus depreciation.  Key individual tax extenders include the deduction for state and local sales taxes and qualified tuition expenses.

Please provide your thoughts on tax reform in the comments below.