Highlights of The American Taxpayer Relief Act

The American Taxpayer Relief Act of 2012 (ATRA) averted the United States’ descent over the “fiscal cliff” — a combination of higher taxes and forced spending cuts scheduled to go into effect in 2013. The act prevented income tax rate increases for about 98% of taxpayers and made other changes affecting individuals and businesses. Here’s a brief summary of the most important provisions.

Individual tax provisions

  • Made permanent 2012 ordinary-income tax rates, ranging from 10% to 35%
  • Increased the top marginal tax rate to 39.6% on taxable income in excess of certain thresholds
  • Allowed the scheduled 2013 return of the limits on certain itemized deductions and personal exemptions
  • Made permanent 2012 long-term capital gains rates of 0% and 15%
  • Increased long-term capital gains rate to 20% for taxpayers with taxable income exceeding certain thresholds
  • Made permanent long-term capital gains treatment for qualified dividends
  • Made permanent alternative minimum tax (AMT) relief
  • Extended the deduction for state and local sales tax in lieu of state and local income tax through Dec. 31, 2013
  • Extended various child- and education-related credits and deductions
  • Extended the ability of taxpayers age 70½ or older to make a direct tax-free rollover from an IRA to charity through Dec. 31, 2013
  • Extended certain home and energy-related breaks
  • Increased the top estate tax rate to 40%
  • Maintained the estate tax exemption amount at $5 million, inflation-adjusted annually

Business tax provisions

ATRA extended through Dec. 31, 2013, several valuable tax breaks, such as:

  • Bonus depreciation
  • Enhanced Section 179 expensing
  • Accelerated depreciation for qualified leasehold, retail and restaurant improvements
  • The Work Opportunity credit
  • The research and development credit
  • Certain energy-related breaks

The impact on you

We’ve touched on only some of ATRA’s numerous provisions here. In addition, many breaks are subject to a variety of rules and limitations. So be sure to discuss them with your tax advisor to determine exactly how they’ll affect you. CCH’s full Tax Briefing: American Taxpayer Relief Act is available by clicking here. Please call us at 847-267-9600  if you have any questions about the new law or how it impacts you directly. We’d be happy to help.

If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.