Highlights of the American Taxpayer Relief Act of 2012


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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