Congress acted to pull the country back from the “fiscal cliff” when HR8 was passed by both chambers and sent to the White House for the President’s signature.
The goal of the legislation is to avert the dire consequences from the confluence of expiring Bush-era tax cuts and the imposition of spending cuts enacted by the Budget Control Act of 2011. Although Congress missed the January 1 deadline for action, lawmakers were determined to act before the U.S. stock markets opened following the New Year’s Day holiday.
HR8 extends the Bush-era tax cuts for individuals earning under $400,000 annually and $450,000 for couples, sets the estate tax rate at 40 percent, with an exemption for estates valued under $5 million, provides a permanent patch for the alternative minimum tax (AMT), and taxes dividends and capital gains at 20 percent for individuals earning over $400,000 and couples with an income over $450,000.
In addition, the plan extends through 2013 many business tax breaks, including the research and experimentation credit and the production tax credit, and extends certain personal tax credits for five years, including the child care, college tuition and the Earned Income Tax Credit. The legislation also delays the budget sequestration spending cuts for two months and extends long-term unemployment insurance benefits for one year. An extension of the two-percent payroll tax holiday was not included in the bill.
Here at Gray, Gray & Gray we are monitoring the situation and final language of the bill, and will continue to keep you informed of any changes. Please join us for our informative webinar on the effects of the “fiscal cliff” legislation taking place on Monday, January 7th at 10:00am EST. You can register by clicking here.