2012 ATRA: highlights of the 2012 American Taxpayer Relief Act include AMT relief, IRA distributions and more.

• Author: Josephs, Stuart R.
• Position: FedTax

Changes Affecting Non-corporate Taxpayers

Income Tax Rates

The 2012 rates for most individuals, estates and trusts will permanently continue thereafter. However. 39.6 percent rate will apply, beginning in 2013, to taxable income exceeding the following "applicable thresholds:"

Single individuals 3400,000 Heads of households 425,000 Married filing jointly and surviving spouses 450,000 Married filing separately 225,000 Estates and trusts 11,950 Net Long-Term Capital Gains and Qualified Dividends Tax Rates

For taxpayer; subject to the 39.6 percent income tax rale, the top rate on net long-term capital gains and qualified dividends will permanently rise from 15 percent to 20 percent.

Observation: Starting in 2013, the 3.8 percent Medicare tax on net investment income applies in (Within to the income tax rates. This Medicare tax is imposed on individuals with modified adjusted gross income exceeding the following thresholds:

Single $200,000 Married filing jointly and surviving spouses 250,000 Married filing separately 125,000 Therefore, the top rates on capital gains and qualified dividends for individuals subject to the Medicare tax are:

Higher-Income Other Taxpayers Taxpayers Net short-term capital gains 43.4% 38.8% Net long-term capital gains 23.8% 18.8% Qualified dividends 23.8% 18.8% Caution: Installment sale payments received after 2012 are subject to tax rates for the year of payment--and not 1hr the year of the sale.

Permanent AMT Relief

The Act "patches" the AMT for 2012 and subsequent years by increasing the exemptions, as follows:

Single individuals $50,600 Married filing jointly and surviving spouses 78,750 Married filing separately 39,375 For tax years beginning after 2012, these amounts will be adjusted annually for inflation.

For tax years beginning after 2011, this Act permanently allows an individual to offset his/her entire regular tax and AMT by nonrefundable personal credits.

Personal and Dependency Exemptions Phaseout

For tax years beginning after 2012, these exemptions an' phased out 1br individuals whose adjusted gross income (AGI) exceeds the following thresholds:

Single $250,000 Head of household 275,000 Married filing jointly or surviving spouse 300,000 Married filing separately 150,000 Under the phaseout, the total amount of exemptions that can be claimed by an individual, subject to this limitation, is reduced by two percent for each $2,500 (or fraction thereof) by which the individual's AG I exceeds the applicable...