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Highlights from the Fiscal Cliff Agreement

Thu, January 03, 2013 5:42 PM | Mary Speed Lynch (Administrator)

Highlights from the Fiscal Cliff Agreement

Below is a list of key points from the Fiscal Cliff Agreement that Congress passed on Tuesday.

Permanently extends the middle-class tax cuts and also extends credits for working families

· Extends middle class tax cuts, which includes lower tax rates, an expanded Child Tax Credit, and marriage penalty relief. In addition, it includes a permanent Alternative Minimum Tax (AMT) fix.

  • Extends Emergency Unemployment Insurance benefits for one year.
  • Extends expansions of the Child Tax Credit, Earned Income Tax Credit, and the new American Opportunity Tax Credit, which helps families pay for college. The agreement would extend them for five years.
  • Extends renewable energy incentives, the Research & Experimentation tax credit, and the Production Tax Credit, 50 percent bonus depreciation through the end of 2013.
  • Avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013 by fixing the sustainable growth rate formula through the end of next year (the “doc fix”).
  • The agreement saves $24 billion, half in revenue and half from spending cuts, which are divided equally between defense and nondefense, in order to delay the sequester for two months.
  • Homeowners who receive principal forgiveness or go through a short sale or foreclosure will not have to pay taxes on the amount of debt forgiven since the deal extends this 2007 Act by one year.

Raises $620 billion in revenue according to Congress’ Joint Committee on Taxation

  • The top rate would return to 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000.
  • The capital gains rate would return to 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.
  • The agreement reinstates the limits on high-income tax benefits, the phaseout of itemized deductions (“Pease”) and the Personal Exemption Phaseout (“PEP”), for couples with incomes over $300,000 and singles with incomes over $250,000.
  • The agreement raises the tax rate on estates worth more than $5 million per person from 35 percent to 40 percent.

Extends the farm bill through the end of the fiscal year, averting a sharp rise in milk prices at the beginning of 2013.

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