After months of uncertainty as to whether the Bush-era tax cuts would expire (among a multitude of other things), Congress found temporary resolution by agreeing on House Resolution 8. After President Obama signed the law on January 2, 2013, the following significant changes became effective:
Income Tax:
-Top tax rate of 35% increases to 39.6% for taxpayers whose taxable income exceeds $400,000 ($450,000 for married couples filing a joint return)
-Taxpayers whose taxable income exceeds $250,000 ($300,000 for married couples filing a joint return) lose the ability to claim certain itemized deductions and will see a phase-out of some personal tax exemptions. In effect, these taxpayers will see slightly increased average tax rates as a result of having less deduction opportunities.
Estate Tax:
-Exemption of $5,120,000 increases to a projected $5,250,000 (after inflation-indexing)
-Top tax rate of 35% increases to 40% for transfers exceeding exemption amount.
Investment Taxes:
-Capital Gains rate of 15% increases to 20% for taxpayers whose taxable income exceeds $400,000 ($450,000 for married couples filing a joint return); remains 15% for those whose taxable income falls below that amount
-Qualified dividend income rates altered similarly to capital gains rate: $400,000+ group pays 20%, middle bracket earners (25%-35% brackets) pay 15%, while low bracket earners (<25% brackets) pay no tax on qualified dividend income.
Photo by: Leader Nancy Pelosi