At the eleventh hour on Tuesday, the U.S. House of Representatives passed the American Taxpayer Relief Act, legislation that enacted extensive tax reforms and averted the feared “fiscal cliff,”— a series of tax increases and spending cuts that threatened to derail the U.S. economic recovery.
The act sets the top income tax bracket at 39.6 percent, where it stood prior to the Economic Growth and Tax Relief Reconciliation Act of 2001, which had pegged 35 percent as the top bracket. The new legislation adjusts the 10-, 15-, 25-, 28-, 33- and 35-percent tax brackets for inflation while fixing the top bracket of 39.6 percent at incomes over $400,000. In the future, the top bracket will be indexed by inflation as well.
Capital gains, dividends rates, estate and payroll taxes and other taxes, credits and regulations are also affected by the bill, which is expected to be sent to President Obama for his signature today.
To learn more about the American Tax Payer Relief Act, its details and what it means to the U.S. economy and small businesses, click here.