New Tax Law for 2013

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Tax Provisions of the American Taxpayer Relief Act of 2012
As the United States was leaning over the edge of the "Fiscal Cliff", the Senate and the House passed the American Taxpayer Relief Act of 2012 (H.R. 8) on January 1, 2013, with President Obama signing the legislation into law on January 2, 2013. The Act permanently extends many of the Bush tax cuts from 2001 and 2003, while delivering upon President Obama's campaign promises to raise taxes on the upper income taxpayers. Below is a summary of the key tax provisions of the Act.

INDIVIDUAL PROVISIONS
TAX RATES – The Act maintains the lower tax brackets for all taxpayers and adds a 39.6% bracket for the following filers:

Married filing jointly (and surviving spouses) with taxable income in excess of $450,000,
Single filers with taxable income in excess of $400,000,
Head of household filers with taxable income in excess of $425,000, and
Married filing separately filers with taxable income in excess of $225,000.
The above amounts will be indexed for inflation in the future.

PHASE OUT OF ITEMIZED DEDUCTIONS – For taxpayers with adjusted gross income in excess of certain thresholds, a phase out of itemized deductions was to be reinstated for 2013. The Act raised the adjusted gross income thresholds, before the 3% reduction begins, to the following:

Married filing jointly (and surviving spouses) with adjusted gross income in excess of $300,000,
Single filers with adjusted gross income in excess of $250,000,
Head of household filers with adjusted gross income in excess of $275,000, and
Married filing separately filers with adjusted gross income in excess of $150,000.
The above amounts will be indexed for inflation in the future, and the overall reduction in itemized deductions will be capped at 80% of the otherwise allowable itemized deductions.

PHASE OUT OF PERSONAL EXEMPTIONS – For taxpayers with adjusted gross income in excess of certain thresholds, a phase out of personal exemptions was to be reinstated for 2013. The Act raised the adjusted gross income thresholds as follows:

Married filing jointly (and surviving spouses) with adjusted gross income in excess of $300,000,
Single filers with adjusted gross income in excess of $250,000,
Head of household filers with adjusted gross income in excess of $275,000, and
Married filing separately filers with adjusted gross income in excess of $150,000.
The above amounts will be indexed for inflation in the future.

MARRIAGE PENALTY RELIEF – The following marriage penalty relief provisions enacted in 2001 were extended by the Act:

The standard deduction of a joint filer will be double that of a single filer, and
The 15% tax bracket for a joint filer will be double that of a single filer.

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ENERGY-RELATED PROVISIONS
The Act also extends a number of energy related provisions such as:

The nonbusiness energy property credit for energy-efficient existing homes is retroactively extended for two years through 2013. A taxpayer can claim a 10% credit on the cost of: (1) qualified energy efficiency improvements, and (2) residential energy property expenditures with a lifetime credit limit of $500 ($200 for windows and skylights).
The alternative fuel vehicle refueling property credit is retroactively extended for two years through 2013 so that taxpayers can claim a 30% credit for qualified alternative fuel vehicle refueling property placed in service through December 31, 2013, subject to the $30,000 and $1,000 thresholds.
The credit for two-wheeled or three-wheeled plug-in electric vehicles is modified and retroactively extended for two years through 2013.
The cellulosic biofuel producer credit is modified and extended one year through 2013.
The credit for biodiesel and renewable diesel is retroactively extended for two years through 2013.
The production credit for Indian coal facilities placed in service before 2009 is extended one year through 2013.
The credits with respect to facilities producing energy from certain renewable resources is modified and extended one year through 2013. A facility using wind to produce electricity will be a qualified facility if it is placed in service before 2014.
The credit for energy-efficient new homes is retroactively extended for two years through 2013.
The credit for energy-efficient appliances is retroactively extended for two years through 2013.
The additional depreciation deduction allowance for cellulosic biofuel plant property is modified and extended one year through 2013.
The special rule for sales or dispositions to implement Federal Energy Regulatory Commission (FERC) or State electric restructuring policy for qualified electric utilities is retroactively extended for two years through 2013.
The alternative fuels excise tax credits for sales or use of alternative fuels or alternative fuel mixtures is retroactively extended for two years through 2013.