The fiscal cliff deal contains a wide array of tax provisions that will affect taxpayers. Here's the list of what is -- and isn't -- in the agreement:
Payroll taxes: Wage earners will now pay a 6.2% payroll tax on the first $113,700 in wages since the deal did not extend the 4.2% rate that had been in place for two years. That means workers earning the national average salary of $41,000 will receive $32 less on every biweekly paycheck.
Tax rates: Taxes are going up on individual filers with incomes above $400,000 and couples above $450,000. The wealthy will pay 39.6% on income above this threshold, up from the 35% rate put in place in 2001. All other current income tax rates -- ranging from 10% to 33% -- are set permanently into law.
Investment taxes: The capital gains and dividend tax rates for filers earning more than $400,000, or $450,000 for couples, will increase to 20% from 15%. Those in the two lowest tax brackets will pay 0%, while all others will pay 15%. (Some investors will also pay an additional 3.8% tax on certain investment income as part of a separate tax previously enacted to pay for the Affordable Care Act.)
Family tax breaks: Tax breaks important to families that were part of President Obama's Recovery Act are extended for five years. They include: American Opportunity Tax Credit, a partially refundable credit of up to $2,500 a year for four years for low-income families; Child Tax Credit, which allows lower-income parents to claim as much as $1,000 for each child under age 17 and is refundable for some, and the Earned Income Tax Credit, which provides a credit for working Americans with low- and moderate-incomes. The expanded dependent care credit, which allows certain taxpayers to deduct up to 35% of expenses to a maximum of $6,000 for two children, is permanently extended.
Itemized deductions/personal exemption: Filers making $250,000, and married couples making $300,000, will be limited in the personal exemptions and itemized deductions they can take. Those with incomes above $422,500 will not qualify for a personal exemption.
Alternative minimum tax: Many in the middle class will be protected from the AMT since the income exemption level will be permanently adjusted for inflation.
Estate taxes: The exemption for estate taxes remains at $5.12 million and will be indexed to inflation going forward. But the top rate rises to 40%, from 35% for those in the highest income bracket.
Marriage penalty: Married couples will continue to receive a standard deduction that's twice that of individuals. And the income ranges for the 10% and 15% tax brackets are also doubled.
Debt forgiveness: Homeowners who receive principal forgiveness or go through a short sale or foreclosure will not have to pay tax on the amount of debt forgiven since the deal extends this 2007 act by one year.
Tax breaks: The deal extends a bevy of tax breaks. So filers can continue to deduct state and local sales taxes. Teachers can continue to get a $250 break on school supply expenses. Eligible students can continue to deduct tuition and other education-related expenses. Individual Retirement Account holders who are older than age 70.5 can continue to make tax-free distributions for charitable purposes.
There are some new lines on the Form 1040 thanks to the fiscal cliff. The IRS has had to set aside space for provisions that Congress hasn't approved yet, leaving those lines as "reserved."
Are you a teacher who spent up to $250 on pencils, books or other classroom supplies? Well, you'll find Line 23 now says "reserved" instead of "educator expenses deduction."
Are you a student looking to deduct up to MORETami Luhby - Dec 28, 2012 1:52 PM ET
Many long-term unemployed will begin seeing their federal jobless benefits disappear starting this week.
Although Congress reauthorized federal emergency unemployment benefits earlier this year, lawmakers reduced the weeks the jobless can collect payments. The cutbacks come in two phases -- one now and another in September.
This round affects the jobless in at least 24 states, while all Americans will be affected in the fall.
Now, those who live in states with unemployment MORETami Luhby - Jun 27, 2012 5:00 AM ET
Congress and the White House took another few steps away from conducting a well-reasoned, bipartisan budget process on Wednesday, as Democrats and Republicans let loose another round of ultimatums and rhetorical bombs.
Let's start with the battle between House Republicans and the White House. Last year, with just hours to spare before a voluntary default on the nation's debt, Congress passed a piece of legislation called the Budget Control Act.
Along with MORECharles Riley - Apr 19, 2012 11:30 AM ET
The 11% of Americans who still approve of Congress are sure to be disappointed by a new report that shows nepotism is running wild in the halls of the Capitol.
Citizens for Responsibility and Ethics in Washington, a liberal watchdog group, took a look at the 435-member House of Representatives and found 248 of them were engaged in activities that warranted inclusion in their report on how lawmakers are using their MORECharles Riley - Mar 22, 2012 10:43 AM ET
House Budget Committee Chairman Paul Ryan is expected to release his budget proposal for fiscal year 2013 on Tuesday, a rather highly anticipated event in Washington.
And Ryan is only adding to the tension, releasing a short video in which he is seen stalking down empty hallways and talking about the nation's debt problems.
Plus dramatic music!Charles Riley - Mar 16, 2012 11:49 AM ET
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