On January 1, 2013, the Senate and the House of Representatives passed the American Taxpayer Relief Act of 2012 (“ATRA”), averting the so-called “fiscal cliff.” The legislation, which was signed by President Obama on January 2, 2013, includes several major changes to the Internal Revenue Code (the “Code”), the most important of which are outlined below.
The most contentious part of the year-end “fiscal cliff” negotiations involved whether individual tax rates would increase for “high-income taxpayers,” with both parties agreeing early that rates should not be increased for most taxpayers. The Obama administration initially would have defined “high income” for single taxpayers and married joint return filers at taxable incomes of $200,000 and $250,000 respectively. The compromise under ATRA defined high-income single and married taxpayers as those having taxable income above $400,000 and $450,000, respectively. As a result, the regular income tax rate for high-income taxpayers will increase from 35% to 39.6% on taxable income over these thresholds, while rates for other taxpayers will be unchanged.
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Topics: American Taxpayer Relief Act, Business Taxes, Capital Gains, Dividends, Fiscal Cliff, Income Taxes, Tax Extensions
Published In: Administrative Agency Updates, Elections & Politics Updates, Finance & Banking Updates, Tax Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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