Provisions in Legislation Addressing Fiscal Cliff
The real estate industry has begun the New Year on a positive note with passage of legislation to address the so-called “Fiscal Cliff”, which contained extensions and restoration of several important tax benefits for homeowners for 2013 and beyond (in some instances). NAR has prepared a full summary of key real estate provisions of the bill signed by President Obama. Here is a brief summary of the non-real estate elements of the legislation:
Income taxes: The Bush-era tax cuts will remain permanently in place for the vast majority of Americans. Those individuals who make more than $400,000 a year—or families making over $450,000 will see their tax rates increase from 35% to 39.6%. Any excess income above these levels will now be taxed at 39.6 percent
Payroll tax cut: The 2-percentage point cut to the payroll tax expired at the end of 2012 and was not renewed. That means the Social Security payroll tax will increase from about 4.2% to 6.2%. That’s approximately $1,000 more for a typical family earning $50,000 a year. The deal also restores the Clinton-era limits on personal exemptions and itemized deductions for households earning more than $300,000 and for single taxpayers earning more than $250,000.
Tax break extensions: Tax breaks, largely for middle-class and low-income Americans, were extended for five years. That includes the Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax credit.
Unemployment Benefits: Extended for one year.
Farm bill extension: The bill, extended for nine months, removes the looming threat of a big rise in the price of milk.
Doctor Fix: Medicare - The legislation staves off scheduled cuts to doctors’ Medicare payments for a year. Initially there was going to be a 27% cut in reimbursements to doctors treating Medicare patients.