The American Taxpayer Relief Act of 2012, passed in the 11th hour, was signed into law by President Obama on January 2, 2013. The following are some of the key highlights to be aware of for your businesses and individual tax situations.
- Extend permanently the 2001 and 2003 current individual income tax rates except for taxpayers with taxable income above a threshold amount of $450,000 for married individuals filing a joint return (MFJ) and $400,000 for single taxpayers; for these taxpayers the maximum ordinary income tax rate is 39.6%
- Repeal the personal exemption phase-out and the itemized deduction limitation for taxpayers with adjusted gross income at or below $300,000 (MFJ) and $250,000 (single)
- Extend the current tax rates on capital gains and dividends except for taxpayers with taxable income above the $450,000 (MFJ) and $400,000 (single); for these taxpayers, the capital gains and dividend tax rate is 20%
- Provide permanent alternative minimum tax (AMT) relief by increasing the exemption amount and indexing it for inflation
- Extend permanently the indexed estate, gift, and generation-skipping transfer tax exemption of $5 million but increase the top rate to 40%
- Extend the 50% bonus depreciation of capital expenditures for one year and increase the section 179 expensing to $500,000 for one year
- Many other expired provisions were extended through 2013, including provisions that expired at the end of 2011
The American Taxpayer Relief Act of 2012 still provides us many planning opportunities. We would encourage you to contact First Western Trust’s team of advisors to discuss any of the tax law updates in further detail.