President Obama has signed the American Taxpayer Relief Act of 2012 (the “Act”). The Act partially averts the so-called “fiscal cliff,” making permanent many Bush-era tax rate provisions while increasing taxes on upper-bracket individuals.

- Individual income tax rates. The Act reinstates a top marginal federal income tax rate of 39.6% for taxable income above $450,000 for married taxpayers filing jointly or $400,000 for single filers. The marginal tax rates on income below those thresholds remain the same as in 2012 for all taxpayers.

- Capital gains and qualified dividend income. Capital gains and qualified dividend income are subject to tax under the Act at a maximum rate of 20% for individual taxpayers in the 39.6% bracket described above. The Act retains 2012 tax rates on capital gains and qualified dividend income for other taxpayers, so that a 15% rate continues to apply to middle-bracket taxpayers. Without this legislation, taxes on qualified dividend income would have reverted to the applicable marginal ordinary income rates.

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Topics:  American Taxpayer Relief Act, Bush-Era Tax Cuts, Capital Gains, Dividends, Educational Assistance Programs, Estate Tax, Fiscal Cliff, Generation-Skipping Transfer, Gift-Tax Exemption, Income Taxes, Retirement, Tax Extensions

Published In: Elections & Politics Updates, Finance & Banking Updates, Labor & Employment Updates, Tax Updates, Wills, Trusts, & Estate Planning 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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