American tax law is a constantly changing landscape. The latest major piece of tax legislation is the American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013, by President Barack Obama. It extended many of the provisions in the Taxpayer Relief Act of 2010 and the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001.
The 2012 tax law extended indefinitely the federal income tax rates that have been in effect since 2003 (10% to 35%) and added the 39.6% rate that was in effect prior to enactment of the 2001 tax law. The law also extended the 0% and 15% tax rates on long-term capital gains and qualified dividends, and added a 20% rate for taxpayers in the 39.6% bracket. The law also extended the federal estate tax provisions of the Taxpayer Relief Act of 2010, with the exception that the top federal estate tax rate increased from 35% to 40%.
EGTRRA was signed into law by President George W. Bush on June 7, 2001. This bill provided the largest tax cut in two decades. Previous administrations have enacted other major tax packages. In the 1980s, the Reagan administration passed the Tax Reform Act of 1986. It not only reduced maximum tax rates and the number of federal income tax brackets but also eliminated many loopholes that existed in the tax code.
The Clinton administration also passed major tax legislation. The Revenue Reconciliation Act of 1993 eliminated some of the changes in the 1986 tax act and added two new federal income tax brackets to the existing three, with the top rate hitting 39.6%. The Taxpayer Relief Act of 1997 incorporated many reforms, including the reduction of long-term capital gains taxes and creation of the child and education tax credits, the Roth IRA, and the Education IRA, among other provisions.
Whenever major changes affect the tax law, there are potential ways that taxpayers can benefit their personal financial situations.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Â© 2014 Emerald Connect, LLC.