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Financial Planning / Tax Strategies
|Subject: Highlights of ATRA 2012||Date: 1/18/2013 10:07 PM|
|Author: ptheland||Number: 117399 of 121252|
I was at a seminar all day yesterday. Thought I'd share a few tidbits from it.
It seems that Congress passed some tax legislation right at the beginning of 2013. Who knew they could be so productive. ;-)
The big items I see in that for 2012 are:
AMT exemptions were increased retroactively and various non-refundable credits are allowed against AMT (that's the "AMT patch"). Plus they are both now permanent and the exemptions are indexed for inflation. No more annual AMT patch games. (Yay!!)
Various sunset provisions of EGTRRA (2001) were repealed. Many parts of the "Bush" tax cuts are now permanent. Student loan interest, Child and Dependent Care Credit, Adoption Credit, marriage penalty relief (15% bracket and standard deduction), and a few other items that we've been working with for the last several years are now permanent. (Well, as permanent as anything is in the tax code. But they no longer self-destruct.)
Some things extended for 2012 (retroactively) and 2013, but not made permanent: $250 for educators, exclusion for discharge of qualified principal residence debt, deduction for mortgage insurance premiums, deduction for state sales taxes, deduction for qualified tuition. These all survive for 2012 and 2013, but are scheduled to sunset after 2013.
Sending IRA RMD to charity - retroactively reinstated for 2012 and 2013. There's some wacky rules to do some contributions in January 2013 and have them apply to 2012.
Credits extended through 2017: American Opportunity, the larger EIC, and refundable child tax credit.
Sec 179 expense: for 2012 and 2013 the max is $500k, with the limit on total assets placed in service at $2 million.
Energy credit (for better windows, doors, and insulation in your home) is extended for 2012 and 2013. But the $500 lifetime cap remains. So if you've already max'd that one out, there no additional credit.
Some stuff applies to 2013 and beyond:
New top tax bracket of 39.6%. Not exactly new, but it's back with higher figures: $400k for singles, $425k HOH, $450 MFJ and surviving spouse (which, I think means $225k for MFS). The marriage penalty is returning.
The concept of qualified dividends is made permanent.
Capital gain (and qual div) tax rate: If you're in the 39.6% bracket, you get a 20% rate. So if you're in the 15% (or lower) bracket your Cap gains are at 0%, over 15% but under 39.6% your cap gains are at 15%, and in the 39.6% bracket your cap gains are 20%. My condolences to the form and worksheet designers at the IRS.
The phaseout is back for itemized deduction and personal exemptions. Based on AGI: $250k single, $275k HOH, $300k MFJ and Surviving Spouse, $150k MFS. These are indexed for inflation in 2014 and beyond. Dredge out the old worksheets and tweak them for the new thresholds.
Bonus depreciation is extended for 2013, but at 50%.
The 2% cut in Social Security tax was not extended. So that's back to the old rate of 6.2% for employees.
There's a lot more in the act, but I think these are the items most commonly seen.
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