Congress' solution to the fiscal cliff focuses almost entirely on taxes with almost no consideration given to spending, setting up another contentious battle within the next two months to address the debt ceiling (the legal borrowing limit of the federal government) and spending cuts. Small-business owners achieved some victories, but high-income owners will see a significant increase in their overall tax bill. The deal includes:
Alternative Minimum Tax exemptions: Married couples making less than $78,750 in 2012 do not have to pay AMT; this threshold will be adjusted for inflation moving forward. This change is permanent, avoiding future AMT battles.
Research and Development Tax Credit: Made retroactive for 2012 and extended through the end of 2013.
Work Opportunity Tax Credit: Extended for one year.
Section 179 deduction: Maintains the maximum deduction of $500,000 and $2 million phase out for 2012 and 2013.
Accelerated depreciation: 50 percent expensing for qualifying assets purchased and placed in services before January 1, 2014.
Ordinary income: Marginal tax rates increase on incomes above $450,000 for married couples ($400,000 for individuals) to 39 percent.
Capital gains: Top rate increases to 20 percent for couples with $450,000 in income and individuals with $400,000 in income.
Payroll taxes: The "employee" portion retains to its normal level, eliminating a 2 percentage point reduction that was temporarily in effect.
Learn more at Forbes.
Read more Finance Watch articles.
Photo: Getty Images