American Taxpayer Relief Act of 2012

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January 22, 2013

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law, avoiding the automatic tax increases of the “fiscal cliff.” The following is an overview of certain key provisions of the new law relating to Individual Income Taxes; Individual Retirement Accounts and Employee Benefit Plans; Estate, Gift and Generation-Skipping Taxes; and Business Taxes.

Individual Income Taxes
The new law permanently extends the Bush-era income tax rates for middle-class taxpayers, and raises the highest marginal income tax rates and the capital gains and dividends rates. In addition, it reinstates certain deduction limitations, provides Alternative Minimum Tax (“AMT”) relief, and extends certain other provisions.

Click here for details on the changes to these rules, including information on:

  • Individual Income Tax Rates
  • Capital Gains and Dividend Rates
  • Phase-Out of Itemized Deductions
  • Phase-Out of Personal Exemptions
  • Alternative Minimum Tax (“AMT”) Relief
  • Other Extenders
  • Reduction in Payroll Tax Expires

Individual Retirement Accounts and Employee Benefit Plans
The new law also includes several provisions relating to individual retirement accounts and employee benefit plans, including tax-free IRA distributions for charitable donations, Roth conversions in 401(k) plans, increased limit on employer-provided transportation benefits and tax-free employer-provided education assistance was made permanent.

Click here for details on the changes to these rules, including information on:

  • Qualified Charitable Distributions for IRAs
  • In-Plan Roth Rollover/Conversion for Retirement Plans
  • Transportation Expense Reimbursement Plan Limit Parity
  • Section 127 Made Permanent

Estate, Gift and Generation-Skipping Taxes
For more than a decade, estate tax planning has been complicated by uncertainty in the estate tax laws. The new law begins to reduce some of that uncertainty for individuals by permanently preventing steep increases in estate, gift and generation-skipping (“GST”) taxes that were set to occur for individuals dying and gifts made after 2012.

Click here for details on the changes to these rules, including information on:

  • Estate, Gift and GST Exemption Level
  • Estate, Gift and GST Tax Rate
  • Portability
  • Effective Date
  • Permanent Changes

Business Taxes
The new law also extends certain favorable business and tax credit provisions through 2013.

Click here for details on the changes to these rules, including information on:

  • Section 179 Expensing
  • First-Year Bonus Depreciation
  • Other Business Tax Extenders
  • Tax Credit Extenders

Many provisions of the new law involve complex and overlapping areas of tax law. The extension of and change in tax rates are permanent in that they do not lapse or expire. However, additional tax legislation may be enacted in the future, which may alter any one or all of the provisions of the new law. If you would like to discuss the impact of the new law on your own tax situation, please contact us.

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