Congress avoids the “fiscal cliff”

Congress celebrated Christmas a little later than most–by giving gifts to taxpayers across the nation on New Year’s Day when they passed the American Taxpayer Relief Act of 2012. Just like Santa, Congress checked their list to see which taxpayers were naughty, nice and which were really nice.

Those that were naughty (who earn more than $400,000) received:
• An increase in their 2013 income tax rate of 4.6%;
• An increased tax on dividends to 23.8% from 15%; and
• An increased tax on their capital gains to 23.8% from 15%

Those that were nice (including some “naughty” taxpayers) received:
• The Research & Development Tax Credit: it has been extended–retroactively for 2012 and through 2013;
• Dividend Rates only increased to 20% or 23.8% for those making in excess of $200,000
• IC-DISCs are still in play because of the income differential between ordinary income and Dividend income;
• Bonus Depreciation is extended through 2013;
• Increased Section 179 expensing; and
• A permanent Fix to AMT (though they still failed to correct the problem for taxpayers living in high tax states).

And, if taxpayers were really nice, they received special gifts like:
• Shortened depreciation periods for their “motorsports entertainment complex”;
• Special expense rules for certain “film and television productions”;
• Reduced Excise Tax on their rum–provided it was produced in Puerto Rico or the Virgin Islands; or
• Big tax credits to make their alternative energy production project economically feasible.

Just like Santa, Congress knows who’s naughty or nice, and they finished their work just in time to avoid a bunch of frowning faces.

For a detailed list of the changes to the tax code, click here.

Kurt Anderson

Kurt Anderson joined CDH in February 2011 as the Principal-in-Charge of our Tax Group. As an attorney and CPA, Kurt has practiced many years in several different settings; in each role, he worked to reduce clients' corporate, estate or individual income tax obligations. http://www.cdhcpa.com
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