Tax rules for the future finally take shape
On January 1, 2013, the U.S. House passed the bill we’ve all been waiting for. Covering a vast array of tax and budget topics, the bill presently awaits the President’s signature.
Highlights include:
- The 2011-2012 Social Security tax break expires on 1/1/13, returning the employee-share of the tax to the pre-break rate of 6.2%
- Increases in both ordinary and capital gains tax rates for those households earning $450k or more per year; the maximum ordinary tax rate increases 13% to 39.6%, capital gains rate in this income category increases 33% to 20%
- Permanent extension of the Alternative Minimum Tax exemption (retroactively to 2012)
- 401(k) balances can be rolled over into a Roth IRA without restrictions such as changing jobs or retiring…the rollover is a taxable event as in the past
Details are still emerging and the IRS will now have some rewriting to do. Bear in mind that the above increases do not factor in the new taxes on investment income effective 1/1/13 (see previous entries on the matter below). Commentary and more details can be read here and here, and a great summary of the provisions can be found here.
