On Jan. 1, 2013, the House of Representatives voted on and approved the Senate’s proposed solution for avoiding the so-called fiscal cliff that was predicted to happen when the tax cuts enacted by the Bush administration expired.
Whether the fiscal cliff deal will boost or put a damper on the country’s economy is a subject of much debate.
Highlights of the fiscal cliff deal include:
- Permanent extension of Bush- era income tax rates for individuals earning $400,000 (or $450,000 if married) or less annually
- For individuals earning more than $400,000 (or $450,000 if married) annually:
- o The Bush-era income tax rates will expire, meaning their tax rates will rise from 35 percent to 39.6 percent
- o The capital gains and dividend tax rates will increase to 20 percent from 15 percent
- o The two new Medicare taxes, enacted in the Affordable Care Act, for high income earners are permitted
- Permanent rates for the Alternative Minimum Tax (AMT)
- The AMT is indexed for inflation
