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Wednesday, January 2, 2013

House Approves Fiscal Cliff Tax Deal

WSJ ChartThe House last night approved H.R. 8 by a vote of 257-167 to avert the fiscal cliff.  The bill now goes to the White House for President Obama's signature.  Highlights of the bill include:

  • Raise the marginal tax rate to 39.6% on income over $450,000 (joint) and $400,000 (single).
  • Raise the tax rate on dividends and long term capital gains to 20% on taxpayers with income over $450,000 (joint) and $400,000 (single).  The top rate would remain 15% for taxpayers with lower incomes.
  • Estate and gift tax:  $5 million exemption (inflation-adjusted) and 40% rate.
  • Permanent and retroactive patch for the AMT.
  • Return of the exemption and itemized deduction phase-outs on taxpayers with income over $300,000 (joint) and $250,000 (single).
  • One-year extension of 50% bonus depreciation.
  • Extension of various tax extenders.

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Comments

And the new trust tax income rates will be?

Posted by: RB | Jan 2, 2013 9:03:31 AM

My clients, the millionaire couple who live quite comfortably on $50,000 annually in dividends, are happy. Their federal tax is still zero. Now if we could just eliminate their state income tax, without forcing a move to Texas.

Posted by: Bob | Jan 2, 2013 9:09:30 AM

Thank goodness Hollywood was able to keep its tax breaks! You wouldn't want all their political contributions to have been wasted.

Posted by: Woody | Jan 2, 2013 9:37:01 AM

According to the Senate Finance summary, the law retroactively "extends for two years, through 2013, the credit under Section 25C of the Code for energy-efficient improvements to existing homes, reinstating the credit as it existed before passage of the American Recovery and Reinvestment Act."

This is the best kind of tax incentive: Reward people who did something even though they did not expect a tax credit for it. Meanwhile, phones are already ringing in the offices of contractors willing to provide backdated receipts.

Posted by: Bob | Jan 2, 2013 9:49:47 AM

A compromise is a deal that pleases no one but that enough people will vote for. So taxes are raised on some of the "wealthy", tax goodies are preserved for some and spending and debt is punted down the road to be fought at another time and same place. This is what happens when you call something a "cliff", allow the media to instill hysteria ("falling off the cliff will be the biggest economic disaster since the .....Great Depression!!!!!")and then wait until the final hour to "reach a deal". God forbid enough people should just act like adults and reach a decent, comprehensive deal.

Posted by: George | Jan 2, 2013 2:19:26 PM

Woody

Thank goodness they kept those bennies for the car racing fans of Georgia.

Posted by: Sid | Jan 2, 2013 7:02:41 PM

Does the new 39.6% rate apply to trusts? Does the new applicable exclusion for estates
start at $5,000,000 or $5,250,000 (counting inflation adjustments?

Posted by: Peter | Jan 3, 2013 6:39:12 AM

Sid, I oppose the NASCAR money, too. I'm for fiscal responsibility by all sides, but I'm not going to see it with either Republicans or Democrats.

Posted by: Woody | Jan 4, 2013 10:54:01 AM