On January 1, Congress passed legislation that eliminates much of the uncertainty on tax rates. Under the new legislation:

• Tax rates will remain the same for all taxpayers except those with taxable income of $400,000 ($450,000 for married couples filing jointly), whose rate will rise from 35% to 39.6% for income over those thresholds, and whose tax rate on capital gains will increase from 15% to 20%. 
• Phaseouts of itemized deductions and personal exemptions will be reinstituted for those with taxable income over $250,000 ($300,000 married filing jointly).  These thresholds are indexed for inflation after 2102, so that they will rise along with other income brackets. 
• The vast majority of transferees will be unaffected by the higher rates, and companies will be able to continue to compute withholding and gross-up for those transferees as in the past. 
• The changes are permanent, so that the tax rates will remain the same unless a future Congress decides to change them, rather than expiring automatically at some point. 
• Permanently fixed the Alternative Minimum Tax (AMT). Exemption amounts will be raised to $50,600 for singles and $78,750 for married taxpayer filing jointly in 2012, and will then be indexed for inflation so that the exemptions (as well as other relevant thresholds in the AMT) will rise along with inflation after 2012.  As a result, there will be no need for annual "fixes," and companies and transferees will have additional certainty as to whether the AMT will apply from year to year.
• Extended the exclusion of mortgage debt forgiveness on principal residences for one year, through 2013.  This is an important provision that has permitted many transferees to make short sales without having to pay taxes on the amount of their mortgages they didn't have to pay.
• Extended for 2012 and 2013 the deduction for mortgage insurance, and the deduction for state and local sales taxes, also important to the mobility industry. 

The legislation does not include an extension of the payroll tax relief that had temporarily reduced the employee portion of the FICA tax from 6.2% to 4.2%.  Consequently, payroll taxes (and gross-up for companies that gross up for FICA) will go up.