The American Taxpayer Relief Act of 2012

Comments:   The American Taxpayer Relief Act of 2012 essentially was an extender of various credits, deductions, and tax rates.  It affects years 2013 and beyond and thus serves as a planning tool for those wishing to minimize taxes for 2013 and beyond. For those who are in the healthcare field, this bill has many updates, specifically related to Medicare.  So be sure to look at the actual summary of the Bill from the US Senate’s website here. The following is our cleanup of that summary.

Title I. General Extensions: Permanent Extension of 2001 Tax Relief, Making Permanent Extension of the Following:

*      10% bracket.


*      The 25%, 28%, and 33% income tax rates;


*      Repeal of the Personal Exemption Phaseout (“PEP”, and permanent repeal of the itemized deduction for certain taxpayers.


*      2001 modifications to the child tax credit.


*      Marriage penalty relief.


*      Expanded Coverdell (Education Savings) Accounts.


*      Expanded exclusion for employer-provided undergraduate & graduate educational assistance up to $5,250, which is excluded from income & employment tax.


*      Expanded student loan interest deduction.


*      Exclusion from income of amounts received under certain scholarship programs (does not apply to qualified scholarships or tuition reductions that represent payment for teaching, research, or other services).


*      Expanded dependent care credit.


*      Increased adoption tax credit for qualified adoption expenses (failed or successful) and the adoption assistance programs’ exclusion from income for employer provided monies provided to employees for adoption expenses. Credit is refundable, meaning it can be a tax refund to the taxpayer over and above the income tax owed by that same taxpayer in a given year.


*      Credit for employer expenses for child care assistance facilities for employees (up to $150,000).


*      Estate, gift and generation skipping transfer tax relief. Exemption amount of $5 million per person is now indexed each year, and the top tax rate is 40 percent for estate, gift, and generation skipping transfer taxes for two years, through 2012.


*      Portability of unused exemption to surviving spouse after death of taxpayer.


*      Reunification of a single graduated rate schedule for both estate & gift taxes.



Permanent Extension of 2003 Tax Relief

*      Capital gains and dividend rates; starting 2013: Capital gains tax for taxpayers below the 25% bracket will be equal to 10%.  For those in the 25% bracket and above, the capital gains tax rate will be 20%. Dividends are subject to the ordinary income rates.  For income in excess of $400,000 (individual filers), $425,000 (heads of households) and $450,000 (married filing jointly), the rate for both capital gains and dividends will be 20%.


Extension of 2009 tax relief

*      Extension of the American Opportunity Tax Credit (for undergraduate college tuition expense) for five additional years, through 2017.


*      Extension of the 2009 modifications to the child tax credit for five additional years, through 2017.


*      Extension of the third-child Earned Income Tax Credit (for families with three children who meet the income eligibility guidelines for EITC) for five years through 2017.


*      Permanent extension of the refund and tax credit disregard for means-tested programs.


Permanent individual Alternative Minimum Tax (AMT) relief

*      Permanent AMT patch.


Title II. Some Individual Tax Extenders

*      Deduction for certain expenses of elementary and secondary school teachers ($250 max) for two years maximum.

*      Mortgage Debt Relief for Mortgage Debt Cancelled on Personal Homes:  Up to $2 million of forgiven debt is eligible to be excluded from income ($1 million if married filing separately) through tax year 2013.

*      Premiums for mortgage insurance deductible as interest that is qualified residence interest for two additional years, through 2013.

*      Deduction for state and local general sales taxes for two years.

*      Above-the-line deduction for qualified tuition related expenses to the end of 2013.

*      Tax-free distributions from individual retirement plan for charitable purposes for two years.



Title III. Some Business Tax Extenders

*      Tax credit for research and experimentation expenses for two years, through 2013 (equal to 20% of the amount by which a taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year and provides an alternative simplified credit of 14 percent).


*      9% Credit Rate Freeze for the Low-Income Housing Tax Credit Program (for facilities placed-in-service BEFORE December 31st, 2013).


*      New Markets Tax Credit for two years for businesses investing in low-income communities


*      Work opportunity tax credit for two years.


*       Returning Heroes and Wounded Warriors Work Opportunity Tax Credits through 2013 (income tax credit & social security tax credit).


*      15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (extension for two years only).


*      Enhanced for two years, the charitable deduction for contributions of food inventory.


*      Temporarily extend increase in the maximum amount and phase-out threshold under section 179.  The modified proposal would increase the maximum amount and phase-out threshold in 2012 and 2013 to $500,000 depreciation and $2 million maximum asset cost respectively.


*      Exemption of tax treatment of certain payments (unrelated business income equaling fair market value) to controlling exempt organizations. (good through 2013).


*      Exceptions under subpart F for active financing income to the end of 2013.


*      Look-through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules (allowing for deferral of certain payments between the CFCs). Good through the end of 2013.


*      Special rules for qualified small business stock extending the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before January 1, 2014 and held for more than five years.


*      Basis adjustment to stock of S corporations making charitable contributions of property (in excess of shareholder basis in S-Corp).


*      Reduction in S corporation recognition period for built-in gains tax.


*      Bonus depreciation provision allowing 50 percent depreciation of qualifying property purchased and placed in service before January 1, 2014 (before January 1, 2015 for certain longer-lived and transportation assets).



Title IV. Some Energy Tax Extenders

*      Credit for certain nonbusiness energy property (25C) for two years through 2013.


*      Alternative fuel vehicle refueling property (non-hydrogen refueling property) 30% investment credit for two years.


*      Plug-in electric motorcycles and highway vehicles individual income tax credit for two years.



 Title X. Budget Provisions


*      Roth conversions for retirement plans. This proposal would allow any amount in a non-Roth account to be converted to a Roth account in the same plan (under section 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan), whether or not the amount is distributable. The amount converted would be subject to regular income tax.

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Are you living abroad and a dual citizen?? Click here.


"OVDI" (Offshore Voluntary Disclosure Program) Remains Open For Those With Undisclosed Foreign Income/Assets;

Other Options other than OVDP remain open too, like Streamlined Procedures.


DNA India, a leading Mumbai daily, quotes Vimlan Tax Services. Click here...


Mileage Rates for 2016 are here..

  1. 54 cents per mile for business miles driven (down from 57.5 cents in 2015);
  2. 19 cents per mile driven for medical or moving purposes;
  3. 14 cents per mile driven in service of charitable organizations;


Mileage Rates for 2015 are here..

  1. 57.5 cents per mile for business miles driven (up from 56 cents in 2014);
  2. 23 cents per mile driven for medical or moving purposes;
  3. 14 cents per mile driven in service of charitable organizations;


International Income Tax Liability...

Worldwide Income Reporting and Foreign Accounts

Most people filing US tax returns know if they are a US Citizen or a Greencard holder, but most do not know if they are a US "tax" resident. You may read the April 2011 E-newsletter we put out which explains the classifications mentioned above or call our office to request an appointment with a qualified tax advisor to discuss your case. Our December 2015 E-newsletter is out as well.