The American Taxpayer Relief Act of 2012 effectively extended many of the tax cuts passed during the administration of President George W. Bush. However, while preserving many lower tax rates, the Act increased rates for higher income brackets.
What Are Some Arguably Negative Effects on 2013 Taxes?
The American Taxpayer Relief Act may affect 2013 taxes in many ways. For example, the top tax bracket was increased to 39.6% for taxable income exceeding $400,000 (for individuals) and $450,000 (for married couples filing jointly). Further, for individuals in the top tax bracket, tax rates on qualified dividends as well as on long-term capital gains went up to 20%.
As for payroll tax rates, a 6.2% Social Security tax (12.4% for the self-employed) applies because the act doesn’t extend employee’s Social Security tax cut. Further, the highest estate tax rate had gone up to 40%.
Are There Any Good Tax Outcomes?
While the Act no doubt raises taxes for the top tax bracket, tax rates remain the same for the lower tax brackets.
The Act provided for the extension of some credits and other tax deductions. For example, charitable contributions by persons of at least 70 1/2 years old from Individual Retirement Accounts (IRAs) will be counted as tax-free distributions. Dependent status, tuition, child and adoption related tax credit remain in place. Moreover, employers, teachers, and other taxpayer groups will still qualify for various tax deductions and credits.
Seeking Help from an Attorney
To understand how various tax deductions and credits apply and to receive professional tax advice about your tax situation, a consultation with a qualified tax attorney or Financial Lawyer may be useful. With the assistance of a tax attorney, you may develop a strategy to optimize your tax planning for the future while ensuring compliance with various tax laws.