In the early morning hours of Jan. 1, 2013, while many were still at parties, the Senate, by a vote of 89-8, passed H. R.8, the "American Taxpayer Relief Act" (the Act). Late on that same day, the House of Representatives, by a vote of 257 to 167, also passed the bill. The Act, which the  President is expected to quickly sign into law, will prevent many of the tax hikes that were scheduled to go into effect this year and retain many favorable tax breaks that were scheduled to expire. However, it will also increase income taxes for some high-income individuals and slightly increase transfer tax rates. In addition, the temporary lower 4.2% rate for the employees' portion of the Social Security payroll tax was not extended, and as a result, the rate has reverted to 6.2%.

Highlights of the Act include the following:

• Individual tax rates: The individual income tax rates will remain the same for individuals, and a new 39.6% rate has been created for taxable income over $400,000 for single individuals, $425,000 for heads of households, $450,000 for married filing joint, and $225,000 for married filing separate. These dollar amounts are indexed for inflation for tax years after 2013.
• Capital gain and dividend rates rise for higher-income taxpayers: For those individuals in the new tax bracket, the top rate for capital gains and qualified dividends will increase to 20%. Those whose ordinary income is in the 10% or 15% bracket, capital gains will be subject to a 0% rate, and those in the middle will retain the 15% rate.

Click here to view full list & article