This is the first in a series on the recent changes enacted as part of the American Taxpayer Relief Act of 2012. The first thing we will look at is how income tax rates have changed. The good news is, for most people, there are no changes other then the usual increases due to inflation. Where things change is when your taxable income is $400,000 or more if you’re single, $450,000 if you’re married filing jointly and $425,000 if you’re a head of household. For taxpayers that exceed that threshold, the tax rate goes from 35% to 39.6%. If you want to see exactly where you fall, please click through to this Forbes article which breaks down each of the tax brackets.
The other change the Act made was to extend the marriage penalty relief for another year. Prior to 2001, there was the marriage penalty where two people who filed single would pay less tax than when those two filed married jointly. For more than the last ten years, this penalty was alleviated by adjusting the marginal tax rates and the standard deduction to where two single filers would pay the same tax as a married couple under similar circumstances. The Act made the marriage penalty relief permanent.