Now that the “payroll tax holiday” has been extended through the rest of 2012, can we expect other significant tax legislation from Congress? Not before the national elections.
Although our nation’s lawmakers may still act to keep several other expiring tax provisions, it seems unlikely Republicans and Democrats will reach consensus on the best tax policy for the country before November. Once voters have been heard, Congress will probably get down to business.
Their task is daunting. Several key tax law breaks are scheduled to be scaled back in 2013 if there’s no congressional action.
- The two top tax brackets for ordinary income in 2012 are 33% and 35%. Absent new legislation, the two top rates in 2013 will rise to 36% and 39.6%, respectively.
- Currently, the maximum tax rate on long-term capital gains and qualified dividends is 15%. These “Bush tax cuts” are set to expire after 2012 when the capital gains rate will jump to 20% and dividends will be taxed at ordinary income rates.
- For 2012, the maximum estate tax exclusion is $5.12 million, and a surviving spouse may take advantage of any leftover exclusion of the spouse who died. But that “portability” is scheduled to end next year, and the exclusion will revert to $1 million.
We still could see wholesale changes in these tax rules . . . but not until later in the year.