Late in the evening on January 1, 2013, Congress prevented the U.S. economy from going off the fiscal cliff. President Obama is expected to sign H.R. 8 into law by January 3.
Key highlights from the bill:
- Tax rates will go up to 39.5 percent for higher income levels ($400,000 individuals and $450,000 married couples)
- Payroll tax not extended, representing a 2 percent rise is payroll taxes paid
- Capital gains rate will increase to 20 percent for higher income levels
- Unemployment insurance extended for one year
- Permanent fixed Alternative Minimum Tax (AMT) to adjust for inflation
- Automatic spending cuts (sequestration) avoided for short term but will come up in future debates; delayed for two months
- Deficit reduction-remains open for debate
- Entitlement programs-remains open for debate
- Debt Limit-remains open for debate (it is estimated there are roughly two months before the limit is reached)
IREM legislative staff continues to monitor this language and the possible changes to come in the near future.