The Bottom Line of the Amended Taxpayer Relief Act

In the wee hours of New Year’s Day 2013, the Senate passed by bipartisan vote an amended version of the American Taxpayer Relief Act of 2012.

How will that translate to your tax return?

Marginal Rates: For taxpayers earning less than $400,000 (single) or $450,000 (joint filers), income tax rates remain unchanged. Above these thresholds, the rate increases from 35% to 39.6%.

Capital gains and dividends: For taxpayers above the $400,000/$450,000 thresholds, the top tax rate on long-term capital gains and dividends rises from 15% to 20% (treatment of carried interest is unchanged). Below these thresholds, the 15% rates remain.

Estate taxes: The estate and gift tax exemption threshold remains at $5 million per individual. The exemption will continue to be indexed annually for inflation. The tax rate increases from 35% to 40%.

For the full rundown, read Morgan Stanley’s “A Guide to the American Taxpayer Relief Act of 2012,” published January 3, 2013.