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
It's reminiscent of 1999, but with a new social media kick. President Obama is using the phrase My2K to spread fears about the fiscal cliff to the masses on Twitter.
The White House claims that if the Bush tax cuts are allowed to expire at the end of the year, the typical family of four will pay $2,200 more in taxes next year. The president wants to extend the tax cuts MOREAnnalyn Kurtz - Nov 28, 2012 4:21 PM ET
As we were researching the origin of the term "fiscal cliff," CNNMoney reached out to linguistics expert Ben Zimmer, executive producer of the Visual Thesaurus and Vocabulary.com and language columnist for The Boston Globe.
We had no idea, but "fiscal cliff" may be considered for the Word of the Year in 2012. That is, if it can beat out "Gangnam Style" and "Frankenstorm"!
Thanks for getting in touch. I've MOREAnnalyn Kurtz - Nov 9, 2012 1:58 PM ET
Federal Reserve Chairman Ben Bernanke is widely credited with coining "fiscal cliff," the ominous term that refers to $7 trillion in spending cuts and tax increases set to be triggered in January.
But the bearded man is the creator of neither the original term, nor its current usage.
"Fiscal cliff" is an expression that has been thrown around for decades with a variety of meanings. The earliest reference we could find MOREAnnalyn Kurtz - Nov 9, 2012 11:58 AM ET
The United States should aim to fix its income inequality problem by improving education for disadvantaged students and raising taxes on the wealthy, according to a new report from a consortium of developed countries.
The report pointed out that the U.S. has among the highest income inequality and relative poverty among the 34 countries that make up the Organization for Economic Cooperation and Development.
"The US education system is less effective than MORETami Luhby - Jun 27, 2012 4:50 PM ET
Former President Bill Clinton said Tuesday that lawmakers will most likely put off making a set of crucial spending and tax decisions until 2013.
"[Congress] will probably have to put everything off until early next year," Clinton said during an interview with CNBC. "That's probably the best thing to do right now."
Clinton was referring to the so-called fiscal cliff -- a series of measures set to begin in January that would MORECharles Riley - Jun 5, 2012 7:14 PM ET
The United States may be hurtling towards a fiscal cliff at the end of the year. But if the U.S. is Thelma then China is Louise. Despite continued fears about another debt ceiling debacle at the end of this year, China is buying U.S. Treasury debt like it's going out of style ... or like it's Facebook stock.
The Treasury Department released its latest figures on foreign holdings of U.S. debt MOREPaul R. La Monica - May 15, 2012 2:57 PM ET
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