9-22 logo from jeremyAdding It Up
January, 2013
American Taxpayer Relief Act of 2012
 
Dear Clients and Friends, 

With the new year upon us and a fiscal crisis averted (presumably), here's a short list of some key highlights of the "Fiscal Cliff" negotiations.  We thank you for your business and we look forward to working with you in the coming year.  
  • Withholding of employee social security tax is now 6.2%.  
    • This rate is up 2% from last year.  The 4.2% reduced rate which expired at the end of 2012 has not been renewed.  This is effective immediately for payrolls paid in 2013 (even if for work done in 2012).   

  • Top income tax rate for individuals has increased to 39.6%.  This affects taxpayers with incomes over: 
    • Single $400,000 
    • Married filing joint $450,000  

  • For taxpayers in the high income tax bracket, there are additional tax increases: 
    • Long-term capital gains tax rate is now 20% (up from 15%) 
    • Qualified dividends tax rate is now 20% (up from 15%) 

  • Deductions reduced for certain higher income taxpayers (Single $250,000; Married $300,000).  
    • Exemptions can be phased out completely 
    • Itemized deductions can be phased out up to 80% 

  • AMT (Alternative Minimum Tax) remains unchanged.
    • If you had AMT before, you're likely to have again.  But AMT shouldn't affect more taxpayers.

  • Self-employment tax rate increases by 2% to 15.3%.   

  • New medicare contribution tax of 3.8% on net investment income for higher income taxpayers.  Single $200,000, Married $250,000. This is on top of Dividend or Capital Gain tax.   
  • Estate tax exemption is effectively unchanged at $5,000,000.

  • Bonus depreciation provisions - retained

Very Truly Yours,

   

Knutte & Associates, P.C.