The recently enacted 2012 American Taxpayer Relief Act is a sweeping tax package that includes, among many other items, permanent extension of the Bush-era tax cuts for most taxpayers, revised tax rates on ordinary and capital gain income for high-income individuals, modification of the estate tax, permanent relief from the Alternative Minimum Tax (“AMT”) for individual taxpayers, and limits on the deductions and exemptions of high-income individuals. Key elements of the package affecting individuals are outlined below.
|
Tax Provision |
Affected Taxpayer |
2012 |
2013 |
| Income Tax Rates | Individual taxpayers with taxable income LESS than $400,000 (single) or $450,000 (joint) |
10%, 15%, 25%, 28%, 33%, 35% |
No Change |
| Income Tax Rates | Individual taxpayers with taxable income GREATER than $400,000 (single) or $450,000 (joint) |
Same as above |
Same as above except 39.6% (for amounts in excess of applicable thresholds) |
| Capital Gains & Dividends Rates | Individual taxpayers with taxable income LESS than $400,000 (single) or $450,000 (joint) |
0% or 15% (depending on the income level) |
No change (but excludes the new 3.8% surtax on investment-type income and gains) |
| Capital Gains & Dividends Rates | Individual taxpayers with taxable income MORE than $400,000 (single) or $450,000 (joint) |
15% |
20% (but excludes the new 3.8% surtax on investment-type income and gains) |
| Estate & Gift Tax | For decedents and gifting in excess of $13,000 (2012) or $14,000 (2013) |
35% top tax rate; Exclusion amount $5,120,000 |
40% top tax rate; Exclusion amount $5,000,000 |
| AMT | Individual taxpayers with adjusted gross income above the threshold amount |
No adjustment for inflation; AMT exemption amounts $33,750 (single) or $45,000 (joint) |
Amounts are indexed for inflation for 2013 and years following; $50,600 (single) or $78,750 (joint) |
| Personal Exemption & Itemized Deductions | Individual taxpayers with taxable income GREATER than $250,000 (single) or $300,000 (joint) |
No Limitation |
Personal exemptions will be phased-out/reduced; itemized deductions will be limited |
| FICA (Payroll) Tax | Employed or self-employed individuals |
4.2% up to FICA base of $110,100 |
6.2% up to FICA base of $113,700 |
The Act also extended through 2013 a number of temporary individual tax provisions, most of which expired at the end of 2011:
- Deduction for certain expenses of elementary and secondary school teachers
- Exclusion from gross income of discharge of qualified principal residence indebtedness
- Parity for exclusion from income for employer-provided mass transit and parking benefits
- Mortgage insurance premiums treated as qualified residence interest
- Deduction of state and local general sales taxes
- Special rule for contributions of capital gain real property made for conservation purposes
- Above-the-line deduction for qualified tuition and related expenses
- Tax-free distributions from individual retirement plans for charitable purposes
If you would like more details about these provisions or any other aspect of the new law, contact the expert listed below at PYA, (800) 270-9629.
