Lawmakers finally broke a deal in the 13th hour of first day of 2013, below are details of the fiscal cliff deal that was passed by the House last night and signed into law this morning by the president. The deal prevents numerous taxes credits and the expiration of President Bush tax rates. However, the bill also sets the stage for continuing battles on spending for the duration of 2013.
- Permanently extends the 10% income tax bracket
- Permanently extends the 25%, 28% and 33% income tax rates on income at or below $400,000 for individual filers, $425,000 for heads of households and $450,000 for married couples filing jointly
- Increases to 39.6% the rate on incomes above $400,000 for individual filers, $425,000 for heads of households and $450,000 for married couples filing jointly
“We encouraged Congress to extend 2012 estate tax provisions to preserve the $5 million exemption level and maintain a 35 percent tax rate to protect a significant number of Nebraska farm and ranch families from being subject to the death tax. Had Congress failed to act the exemption would have lowered to $1 million which would have broadened the reach of the estate tax to more Nebraska farms. Congress’ action to keep the $5 million exemption is a positive. However, Congress ultimately raised the rate to 40 percent which is a concern,” said Steve Nelson, Nebraska Farm Bureau Federation president.
- Permanently extends the current exemption amount, exempting estates up to $5.12 million ($5 million indexed for inflation for years after 2011)
- Increases the maximum rate to 40% — an increase from the current 35% rate — for estate values above the exemption amount
- Extends gift tax levels of a $5.12 million ($5 million indexed for inflation) exemption and a 40% top rate
Capital Gains and Dividends
- Extends the current capital gains and dividends rates on income at or below $400,000 (individual filers), $425,000 (heads of households) and $450,000 (married filing jointly)
- Under current law, the capital gains and dividend rates for taxpayers below the 25% bracket is equal to zero percent. For those in the 25% bracket and above, the capital gains and dividend rates are currently 15%.
- Increases the rate to 20% for both capital gains and dividends for income in excess of $400,000 for individual filers, $425,000 for heads of households and $450,000 for married couples filing jointly
Small Business Tax Credits
“We are pleased Congress included tax provisions to help small businesses, the backbone of America’s economy. Congress increased the maximum amount small businesses can expense for capital purchases up to $500,000 for next year while also extending the 50 percent bonus depreciation for the purchases of capital assets. Both provisions will help farmers, ranchers and other small businesses when they invest in new equipment and assets to improve their operations,” said Nelson.
- Extends the provision to allow businesses to deduct from their taxes 50% of the value for property placed in service before the end of 2013 in addition to amounts that they could otherwise claim under depreciation rules. Bonus depreciation is allowed against both the regular tax system and the Alternative Minimum Tax.
- Increases for 2012 and 2013 the Section 179 expensing limit to $500,000, with the phase-out beginning when investments exceed $2 million
Individual Alternative Minimum Tax (AMT) Relief
- Increases the AMT exemption amounts for 2012 to $50,600 for individuals and $78,750 for married couples filing jointly and indexes the exemption and phase out amounts thereafter
Farm Bill Programs Extension
“Disappointing for Nebraska farmers and ranchers is the decision to include, but not fund, much needed livestock disaster programs, despite the fact that both Democrats and Republicans in the House and Senate supported re-authorization for these programs. Given the seriousness and impacts of the lingering drought, re-authorization and funding for these programs was critical, and now all we have is uncertainty and a reality that funding is highly questionable,” said Nelson. “It is our hope that a new Congress will use 2013 to reevaluate the opportunities to address these issues through a new five-year farm bill.”
- Extends through the end of FY 2013 (Sept. 30, 2013) most provisions of farm policy as they were in effect on Sept. 30, 2012, under the 2008 Farm Bill, including direct payments
- Extends current commodity terms and conditions for all commodities for the 2013 crop year including sugar beets
- Extends through Dec. 31, 2013, the Dairy Product Price Support Program and the Milk Income Loss Contract Program
- Maintains the maximum enrollment in the Conservation Reserve Program at the same level (32 million acres) that has applied for fiscal years 2010 through 2012
- Authorizes $30 million in discretionary funding for the beginning farmer and rancher development program, which received $49 million in mandatory funding in FY 2012
- Authorizes funding, but does not provide actual dollars, for certain agricultural disaster assistance programs for FY 2012 and 2013, including:
- $80 million a year for livestock indemnity payment
- $400 million a year for the livestock forage disaster program
- $50 million a year for emergency assistance for livestock, honeybees and farm-raised fish
- $20 million a year for the tree assistance program
- Authorizes discretionary funding for two programs under the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps). SNAP’s employment and training programs would be authorized at $79 million for FY 2013 (an $11 million reduction from the $90 million in mandatory spending it received in FY 2012).