To follow is a summary of key provisions of the law signed by President Obama on January 1:
- The end of 2011 and 2012 temporary payroll tax cuts, resulting in a 2% tax increase for workers.
- Makes permanent tax rates for individuals making $400,000 or less per year.
- Increases tax rate for individuals making $400,000 or more (married couples making $450,000 or more) from 35% to 39.5%.
- Capital gains taxes remain at 15% for income below $400,000 ($450,000 for married couples). The maximum rate for individuals with income over the limit is 20%.
- Dividend tax rates will remain the same, taxed at the long-term capital gains rate (15%) for taxpayers below the $400,000/$450,000 level. Those above will be taxed at 20%.
- Makes permanent a 40% estate tax rate with a $5 million exemption level (increase from 35%, exemption level remains the same)
- Returns Section 179 expensing deductions to $500,000 for equipment purchased in 2012 and 2013. This is a retroactive increase for 2012 as the deduction amount was $139,000.
- 50% bonus depreciation extended through 2013.
- Two-year retroactive extension of the Research and Development (R&D) Tax Credit, which expired on December 31, 2011. (January 1, 2012–December 31, 2013)