N Diane M. Nardy CPA LLC
6278 Valley Stream Dr, Dublin OH 43017
Office: 614-761-8015
Fax: 614-761-1327
dnardy@columbus.rr.com
Highlights of the American Taxpayer Relief Act of 2012
The Bush-era tax cuts were permanently extended for all but "high income earners." Who counts as a "high income earner?" Those individuals with $400,000 or more in income ($450,000 if married filing jointly). These individuals will now be subject to a new, higher tax bracket of 39.6 percent.
Additionally, those with incomes over $250,000 ($300,000 if married filing jointly) are now subject to personal exemption and itemized deduction phase-outs.
The following are some other rate changes that impact individuals:
Alternative Minimum Tax (AMT) exemption has been permanently adjusted for inflation. For 2012, the exemption amounts are $50,600 for single taxpayers and $78,750 for joint filers.
2 percent payroll tax holiday was not renewed which means the 2013 FICA tax rate jumps back to 6.2 percent. This is the one area were nearly everyone will see an increase.
Capital gains and dividends: For taxpayers above the $450k/$400k thresholds, the top tax rate on long-term capital gains and dividends would rise from 15% to 20% (No changes to the treatment of carried interest). For taxpayers below these thresholds, the 15% rates remain. These are permanent changes.
Estate taxes: The estate and gift tax exemption threshold would remain at $5 million per individual. The exemption will continue to be indexed annually for inflation. The tax rate increases from 35% to 40%. Also, reunification of the estate and gift tax remains. These are permanent changes.
PEP and Pease: With regard to the Personal Exemption Phase-out (PEP) — the bill permanently extends the repeal of PEP for taxpayers earning less than $250k (single) or $300k (joint filers). For individuals above those threshold amounts, PEP would return. With regard to Pease (3% limitation on itemized deductions), the bill permanently extends the limitation for taxpayers earning less than $250k (single) or $300k (joint filers). For individuals above these threshold amounts, the limitation on itemized deductions would return. This is a permanent change.
Education: With regard to education-related provisions, the compromise would permanently extend: the expanded Coverdell Accounts contribution limits; the expanded exclusion for employer-provided educational assistance; expanded student loan interest deduction; the exclusion from income of amounts received under certain limited scholarship programs; and extend the American Opportunity Tax Credit for five additional years. Extend through 2013 the above-the-line deduction for qualified tuition and related expenses.
Mortgage Debt Relief: A one-year extension of the Mortgage Debt Relief Act of 2007 provision that allows for taxpayers who have mortgage debt relief canceled or forgiven to have up to $2 million excluded from income. This would expire at the end of 2013.