More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Long Term Care Insurance: Premiums While premiums for qualified long-term-care insurance may be deductible as medical expenses there are exceptions to this general rule. Learn how to avoid unnecessary tax liabilities.
As expected, the House took the opposite stance to tax cuts as the Senate and passed legislation Wednesday that would extend all of the Bush tax cuts for everyone for one year.
The House rejected the Senate’s vote on July 26 to extend the Bush tax cuts for only those families earning less than $250,000 a year, which President Obama had asked Congress to do.
Senate Majority Leader Harry Reid, D-Nev., issued a statement the same day the House voted on its bill, H.R. 8, which passed 256-171. “For nearly two years, the Republican-led House has ignored the will of the American people by accomplishing virtually nothing of bipartisan substance,” Reid said, urging House Republicans “to show Americans that you are still capable of accomplishing something of utility by passing the only bill to avoid the fiscal cliff for middle-class families that has a chance of being signed into law: the Senate’s middle-class tax cut.” Reid noted that the bill the House passed Wednesday had “already been rejected by the Senate on a bipartisan basis.”
Meanwhile, on Thursday, the Senate Finance Committee passed the Family and Business Tax Cut Certainty Act of 2012, bipartisan legislation to extend tax cuts that have expired or will expire at the end of this year for American families and businesses. The committee approved the bipartisan bill by a vote of 19-5.
The legislation includes tax cuts for small businesses, working families, research and development and renewable energy.
In passing the bill, Senate Finance Committee Chairman Max Baucus, D-Mont., said the legislation "gives certainty to and critical support for working families and businesses across the country and prevents middle-class families from being hit by the Alternative Minimum Tax (AMT) for two years."
Sen. Orrin Hatch, R-Utah, said in remarks at the markup on Thursday that “the explosion of temporary tax provisions in recent years has been a very notable and problematic trend.” The number of such provisions, he said, “has grown from 42 in 1998 to 154 in 2011. If you average that number out, you will find that, over that 13-year period, Congress was adding almost nine extenders per year.”
Hatch went on to say that “this markup is not business as usual.” The markup by Chairman Baucus, he said, “reverses the trend on extenders. The tide is turning. For the first time in my 21 years on this committee, we are deliberately moving in the opposite direction.” He noted that Baucus’ tax extender package “reduces the number of extenders by over 25%.”
One of the proposals Baucus’ tax extender bill includes is extending the Alternative Minimum Tax (AMT) relief to 2013. Currently, a taxpayer receives an exemption of $33,750 (individual) or $45,000 (married filing jointly) under the AMT. Current law also does not allow nonrefundable personal credits against the AMT.
The proposal increases the exemption amounts for 2012 to $50,600 for individuals and $78,750 for married couples filing jointly. The modified proposal would also increase the exemption amounts for 2013 to $51,150 for individuals and $79,850 for married couples.
The proposal also allows the nonrefundable personal credits against the AMT in both 2012 and 2013, and is effective for taxable years beginning after Dec. 31, 2011. Baucus says a two-year extension of this modified AMT proposal is estimated to cost $132.2 billion over 10 years.