<p>On January, 2013, as a part of the general income tax updates and changes, the federal estate tax law was extended and clarified. It was called the American Taxpayer Relief Act of 2012.</p>
<p>Overview of the American Taxpayer Relief Act of 2012  <br /><br />On January 2, 2013, The President signed the American Taxpayer Relief Act of 2012 (the “Act”). The Act increases income taxes for certain high-income individuals and reduces certain income tax deductions.  <br /><br />The following is a summary of the highlights of the new tax laws:<br /><br /> Income Tax Rates. Ordinary income tax rates for individuals will remain at 10%, 15%, 25%, 28%, 33% and 35%, but a new 39.6% rate will apply to income in excess of $450,000 for joint filers and qualifying widow(er)s; $425,000 for heads of household; $400,000 for single filers;   <br /><br /> Estate Tax. The new law  keeps the exemption levels at $5,000,000 (2012 and will be indexed for inflation in future years). The 2013 level has been estimated to be about $5,250,000. The new law increases the top estate, gift, and Generation Skipping Tax rate (for transfers in excess of the exemption amounts) from 35% to 40%. It also continues the portability feature that allows the estate of the first spouse to die to elect to transfer his or her unused estate and gift tax exemptions (but not his or her unused GST exemption) to the surviving spouse The annual gift tax exclusion for 2013 has increased to $14,000.<br /><br /> Capital Gains and Qualified Dividends Rates. The top rate for capital gains and dividends will increase to 20% (from 15%) for taxpayers with incomes exceeding $400,000 (single) or $450,000 (joint filers).   It should be noted that the 20% top rate does not include the new 3.8% surtax on investment-type income and gains for tax years beginning after 2012, which applies on investment income above $200,000 (single) and $250,000 (joint filers) in adjusted gross income. This means that the top rate for capital gains and dividends beginning in 2013 will be 23.8% if income falls in the 39.6% tax bracket. For lower income levels, the tax will be 0%, 15%, or 18.8%.<br /><br /> Personal Exemption Phaseout. Beginning in 2013, personal exemptions will be phased out (reduced) for adjusted gross income over $250,000 (single), $275,000 (head of household) and $300,000 (joint filers). Taxpayers claim exemptions for themselves, their spouses and their dependents. In 2012, each exemption was $3,800.<br /><br /> Itemized Deduction Limitation. Beginning in 2013, itemized deductions will be limited for adjusted gross income over $250,000 (single), $275,000 (head of household) and $300,000 (joint filers). For taxpayers subject to the limitation on itemized deductions, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer’s adjusted gross income exceeds the threshold amount, not to exceed 80% of the allowable itemized deductions.<br /><br /> <br /> <br /> <br /> <br /></p>