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Lisa J. Montano CPA, PA

Certified Public Accountant

Lisa Montano's Financial Advisory Blog

I’ve Fallen and Still Can’t Get Up (fiscal cliff legislation)

January 2nd, 2013

13th hour fiscal cliff legislation was passed yesterday that raises taxes slightly and postpones automatic spending cuts for two months.  Here are the highlights of the new tax laws:

  • Tax rates remain the same for singles earning up to $400,000 and couples earning up to $450,000. Above this income level, the marginal tax rate rises to 39.6%.
  • Certain personal exemptions are phased out for individuals with $250,000 of taxable income and joint filers with $300,000 or more of taxable income.
  • Capital Gains and Dividend income get a new top bracket of 20% for the highest earners ($400,000 individual taxable income, $450,000 joint). These same earners will be paying a 3.8% healthcare surcharge on investment income.
  • The Alternative Minimum Tax threshold has been permanently indexed to inflation.
  • The Estate Tax exemption has been set at $5 million and the federal tax rate at 40%.
  • The Social Security tax holiday, reducing payroll tax by 2 percentage points, has expired, bringing the payroll tax rate back to 6.2% on the first $113,700 of earned income.

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