|9 Most Contentious Taxes in Cliff Deal|
|By SUSANNA KIM (@skimm)||Jan 3, 2013, 1:38 PM|
While Congress has yet to discuss spending cuts to defense and domestic programs, they have drawn the line on tax increases and tax break extensions.
Some businesses are happy about certain temporary tax credits, like the R&D credit, which expired in 2011, that Congress retroactively extended through 2013.
Joseph Rosenberg, research associate with Urban-Brookings Tax Policy Center, said the basic outline of the deal did not have too many surprises.
"The fact that it was all done on a permanent basis -- not a one or two year extension -- was probably the only thing that was the biggest surprise to me," he said.
Read more: Obama Signs 'Fiscal Cliff' Bill With Autopen
Congress will of course have to deal with the budget deficit which is still trillions of dollars.
"There definitely will be further discussions and steps with regard to spending and revenue too," he said. "I don't think anybody should expect this to be the last action taken."
The following describes the resolutions of nine of some of the most-talked about tax items in the budget debate, according to Rosenberg:
The payroll tax "holiday" is officially over. Employee Social Security tax withholding increases to 6.2 percent from 4.2 percent.
The top rate increased to 20 percent from 15 percent, plus filers are subject to the the 3.8 percent Affordable Care Act surtax. This increase was what many investors had expected.
The top rate for the dividend tax increased to 20 percent from 15 percent, plus filers are subject to the 3.8 percent Affordable Care Act surtax. This increase was much lower than the 43.4 percent some investors had anticipated.
While Congress did not adjust the Alternative Minimum Tax for inflation this year, the AMT exemption increased to $50,600 for single filers and $78,750 married couples from $33,750 and $45,000, respectively.
Read more: Is the AMT Patch Finally Dead?
This tax break of itemized deductions for mortgage interest is now capped for single filers earning more than $250,000 and married filers earning more than $300,000.
Lawmakers increased the estate tax to the top rate of 40 percent from 35 percent.
The Bush-era tax cuts were extended for those earning less than $400,000 per year, or $450,000 for married couples. Those making more than $2.7 million will pay an average of $443,910 more in 2013; those making $500,000 to $1 million will pay an average $14,812 more, Bloomberg reported. Personal itemized deductions and personal exemptions from the 2001 Bush tax cuts were phased out for those making $250,000 or $300,000 for married couples.
Read more: What Happens If the Bush Tax Cuts Expire?
This increased to $113,700. This changes automatically every year based on changes in a national wage index.
Taxable Medicare wages paid in excess of $200,000, or $250,000 for married couples, are subject to an extra 0.9 percent Medicare tax, Forbes reported.
Read more: Medicare And the Fiscal Cliff: To Cut Or Not