Congress began 2013 by passing "The American Taxpayer Relief Act of 2012" (the "Act") reflecting a plan negotiated by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) to avoid a series of tax hikes scheduled to take effect upon the expiration of the "Bush tax cuts."
Some of the more significant features of the Act are as follows:
Income tax rates. The Act maintains the "Bush" tax rates for individuals with taxable income under $400,000 ($450,000 for married individuals, $425,000 for those filing as a head of household). Taxable income over and above these thresholds is taxed at the pre-Bush maximum rate of 39.6 percent.
Capital gains and dividends. Long term capital gains and dividend income of taxpayers having taxable income below the $400,000/$450,000 levels would continue to be taxed at the 15 percent rate while individual taxpayers above those income thresholds would be subject to 20 percent rate on long term capital gains and dividends. In addition, the higher income taxpayers will be subject to tax at the rate of 23.8 percent because of an additional 3.8 percent tax that was part of the included in the 2010 "Obamacare" health care legislation.
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