The American Taxpayer Relief Act of 2012 enacted this month contains 164 pages of tax law changes. Below are the top ten changes that will affect taxpayers:
1. The top marginal rate increased to 39.6% from 35% for single taxpayers making over $400,000 and married taxpayers making over $450,000 effective 1/1/2013.
2. The rate for long term capital gains and qualified dividends increased from 15% to 20% effective 1/1/2013 for only those taxpayers in the top marginal bracket.
3. The 2% reduction in social security payroll taxes expired 12/31/12.
4. The maximum estate and gift tax rate increased from 35% to 40% and the exclusion remained at $5 million adjusted for inflation effective 1/1/2013. The estimated amount for 2013 is $5,220,000.
5. The individual alternative minimum tax exemption was permantly increased and indexed for inflation beginning with 2012. This will prevent millions of taxpayers from being exposed to this tax.
6. The option to deduct sales tax instead of state and local income tax which expired at the end of 2011 has been extended through 2013.
7. Itemized deductions will be limited for higher income taxpayers with adjustd gross income(AGI) over $200,000 for singles and $250,000 for joint filers. The reduction is equal to 3% of the AGI over the thresholds. This is effective 1/1/2013. This law had been phased out 1/1/2010.
8. Taxpayers will also lose part of their personal exemptions effective 1/1/2013 if their AGI is above the $200,000/$250,000 amounts. This law had been phased out 1/1/2010.
9. The credit for energy efficient home improvements of $500 which expired at the end of 2011 has been extended through 2013.
10. 50% bonus depreciation for qualifying property which expired at the end of 2012 has been extended through 2013. The property has to be new property.
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