On January 3, 2013, President Obama signed into law The American Taxpayer Relief Act of 2012. This new law, which went into effect in 2013, establishes a set of permanent federal tax rules. This post is the first in a series aimed at examining what the new law means for you. Key components of the new act include the following:
– The Bush tax cuts for individuals making under $400,000 ($450,000 for married couples filing jointly) are now permanent. Those making in excess of the above amounts will be in the top tax tier and will pay 39.6% in income taxes (up from 35%). These amounts will be adjusted annually for inflation.
– For individuals (or married couples filing jointly) in the top tax tier, long-term capital gains and dividends will be taxed at 20% (up from 15%). For those making less than the above-noted amounts, long-term capital gains and dividends will continue to be taxed at 15%.
– Personal exemptions will be reduced for individuals with adjusted gross incomes exceeding $300,000 for joint filers and $250,000 for single filers. Itemized deductions will also be reduced based on the adjusted gross incomes noted here. These amounts will be adjusted annually for inflation.
– The $5 million exemption for federal estate tax and for lifetime gifts, and for the Generation Skipping Tax (all adjusted for inflation), will remain in effect. Above this $5 million dollar limit, the top tax rate will be 40% (up from 35%).
– The 2% reduction in payroll taxes (implemented during the Obama administration’s first term) expires under the new law.
Now that The American Taxpayer Relief Act of 2012 has been passed, there is closure on several issues where there was uncertainty at the end of 2012. That make this a good time to re-examine your estate plans and long-term goals.
Getting Legal Help
Experienced Estate Planning and Tax attorney, Elga Goodman, can help you understand the new law and how it applies to you. She can work with you to evaluate your options and create an estate plan that best reflects your wishes and the needs of your family. Contact us today at 973-841-5111.
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