Two fiscal cliff plan questions

[Deleted]

I'm having trouble finding easy answers...

(a) Is there a "what the whole plan entails" for dummies anywhere?

(b) I've seen that itemized deductions will be capped, but I can't find info on what the cap will be. Does anyone know?

Thanks!

[Deleted]

I feel like I'm illiterate trying to wade through it all. I have no idea what any of it means, really. So, basically, I'm no help but I can commiserate.

[njohnson1972]

1. I like this summary: www.cbsnews.com/8301-505123_162-57561480/what-the-fiscal-cliff-bill-means-to-taxpayers/

2. The Personal Exemption Phaseout (PEP) and the itemized deduction limit are set at $250,000 for singles and $300,000 for joint filers. I can't find details on the Phaseout, such as at what point is it completely phased out? $350,00 for joint filers??

[LoveTrains]

Why oh why do they continue to put such a high marriage penalty on everything in this country?

[Deleted]

Jan 2, 2013 11:09:50 GMT -5 LoveTrains said:

Why oh why do they continue to put such a high marriage penalty on everything in this country?

I know! $250,000 for one person but $300,000 for marrieds is ridiculous.

[njohnson1972]

Jan 2, 2013 11:09:50 GMT -5 LoveTrains said:

Why oh why do they continue to put such a high marriage penalty on everything in this country?

I totally agree. At one point, I realized we would pay $10,000/year less in taxes if we could file Single. Sometimes I wonder if being married is worth $10,000/year ;D

[genet313]

Jan 2, 2013 11:13:10 GMT -5 v said:

Jan 2, 2013 11:09:50 GMT -5 LoveTrains said:

Why oh why do they continue to put such a high marriage penalty on everything in this country?

I know! $250,000 for one person but $300,000 for marrieds is ridiculous.

The CBS summary says $400 individual and $450 married, so at least it's a higher threshold than $250, even if the marginal increase from individual/married is still ridiculously low.

[y4m]

Jan 2, 2013 11:09:50 GMT -5 LoveTrains said:

Why oh why do they continue to put such a high marriage penalty on everything in this country?

Seriously.

Here's some detailed info on the Pease Amendment, which is the deduction cap for high earners. From my quick read, it's even worse in terms of the marriage penalty than the deal itself--the threshold for Single and MFJ are identical. Wonderful.

www.nonprofitquarterly.org/policysocial-context/21555-the-fiscal-cliff-legislation-a-primer-for-nonprofits-on-its-provisions.html

ETA a bit more here: www.taxpolicycenter.org/press/press-resources-pease.cfm

[kadams767]

Jan 2, 2013 11:22:56 GMT -5 genet313 said:

Jan 2, 2013 11:13:10 GMT -5 v said:

I know! $250,000 for one person but $300,000 for marrieds is ridiculous.

The CBS summary says $400 individual and $450 married, so at least it's a higher threshold than $250, even if the marginal increase from individual/married is still ridiculously low.

The $400/$450k limits are for increased income taxes. The $250/$300k limits are for the cap on itemized deductions. Two separate thresholds for two separate things, just so no one is getting confused.

[genet313]

Jan 2, 2013 11:32:50 GMT -5 kadams767 said:

Jan 2, 2013 11:22:56 GMT -5 genet313 said:

The CBS summary says $400 individual and $450 married, so at least it's a higher threshold than $250, even if the marginal increase from individual/married is still ridiculously low.

The $400/$450k limits are for increased income taxes. The $250/$300k limits are for the cap on itemized deductions. Two separate thresholds for two separate things, just so no one is getting confused.

Oooh...I get it now. Thanks for the clarification!

[njohnson1972]

Jan 2, 2013 11:32:50 GMT -5 kadams767 said:

Jan 2, 2013 11:22:56 GMT -5 genet313 said:

The CBS summary says $400 individual and $450 married, so at least it's a higher threshold than $250, even if the marginal increase from individual/married is still ridiculously low.

The $400/$450k limits are for increased income taxes. The $250/$300k limits are for the cap on itemized deductions. Two separate thresholds for two separate things, just so no one is getting confused.

:Y:

[spunkarella]

Jan 2, 2013 11:03:23 GMT -5 njohnson1972 said:

2. The Personal Exemption Phaseout (PEP) and the itemized deduction limit are set at $250,000 for singles and $300,000 for joint filers. I can't find details on the Phaseout, such as at what point is it completely phased out? $350,00 for joint filers??

Disclaimer - I am not a tax person. This is what the mailer our firm sent out to tax clients says (paraphrased to decrease googleability):

The total amount of itemized deductions is reduced by 3% of the amount by which your AGI exceeds the threshold. The total reduction is capped at 80% of your otherwise allowable deductions.

[njohnson1972]

Jan 3, 2013 9:03:24 GMT -5 spunkarella said:

Jan 2, 2013 11:03:23 GMT -5 njohnson1972 said:

2. The Personal Exemption Phaseout (PEP) and the itemized deduction limit are set at $250,000 for singles and $300,000 for joint filers. I can't find details on the Phaseout, such as at what point is it completely phased out? $350,00 for joint filers??

Disclaimer - I am not a tax person. This is what the mailer our firm sent out to tax clients says (paraphrased to decrease googleability):

The total amount of itemized deductions is reduced by 3% of the amount by which your AGI exceeds the threshold. The total reduction is capped at 80% of your otherwise allowable deductions.

Thanks! I couldn't find more detail on that part. But seriously, could they make that formula any more complicated?

[Deleted]

Jan 3, 2013 10:43:58 GMT -5 njohnson1972 said:

Jan 3, 2013 9:03:24 GMT -5 spunkarella said:

Disclaimer - I am not a tax person. This is what the mailer our firm sent out to tax clients says (paraphrased to decrease googleability):

The total amount of itemized deductions is reduced by 3% of the amount by which your AGI exceeds the threshold. The total reduction is capped at 80% of your otherwise allowable deductions.

Thanks! I couldn't find more detail on that part. But seriously, could they make that formula any more complicated?

Yes -- thanks so much! That was the info I couldn't find. But that is ridiculously complicated.

[Deleted]

This is a summary I received from someone:

- Permanent extension of Bush-era tax cuts except for those individuals making $400K/families making over $450K. Highest tax rates rise from 35% to 39.6%

- Personal Exemption Phase Outs for individuals making $250K/families making $300K

- Capital gains increase to 20% for individuals making $400K/families making over $450K

- Increase in payroll tax rate from 4.2% to 6.2%, income limit from $110K to $113.7K (approx of $1K-$2.2K for average middle income family)

- Extension of unemployment insurance

- Extension of Child Tax Credit, Earned Income Tax Credit, and tax breaks for college tuition

- Re-set of estate tax, now at 40% for estates above $5 million. Below this number, estates will be exempt.

- Permanent inflation index fix for AMT

- Extension of bonus depreciation

- Doc fix that prevents rate cuts to doctors who treat Medicare patients

HTH!