Home Business Economy & Politics What’s the deal? Highlights of fiscal cliff agreement

What’s the deal? Highlights of fiscal cliff agreement

US Congress last night finally passed a deal to avoid the so-called fiscal cliff, as critics attacked the Republican party for giving in and allowing tax hikes on in return for minimal spending cuts.

President was in a triumphant mood as he addressed the nation after the vote on Capitol Hill, even winking at photographers before flying back to Hawaii to resume his vacation.

  • : Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6%, up from the current 35%. Extends Bill Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 andcouples earning more than $300,000.
  • Estate tax: Estates would be taxed at a top rate of 40%, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35%.
  • Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15% to 20%.
US Congress finally passed a deal to avoid the so called fiscal cliff 350x197 photo

US Congress finally passed a deal to avoid the so-called fiscal cliff

  • Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
  • Other : Extends for five years Obama-sought expansions of the , earned , and an up to $2,500 tax credit for . Also extends for one year accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
  • : Extends jobless benefits for the long-term unemployed for one year.
  • Cuts in Medicare reimbursements to doctors: Blocks a 27% cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
  • Social Security payroll tax cut: Allows a 2 percentage point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2%.
  • Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rules changes on converting traditional individual retirement accounts into Roth IRAs.

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