Image: Uncle Same © Mike Kemp, Rubberball, Getty Images

You may be a winner, or a loser. But for certain you've been affected by the new tax deal. Here are 11 areas you should know about:

Income tax rate increase?

Not for you unless you make more than $400,000 ($450,000 for joint returns). If you're part of the 2% that may get hit with this extra tax, suck it up! It's only an additional 4.6% and that applies only to the income above $400,000 ($450,000). So, a couple making $500,000 would pay an extra $2,300 ($50,000 at 4.6%). The rest of us are still paying under the old rates.

Payroll tax increase

Even if your rates stay the same, your check is going to be smaller. Facing a projected shortage in future funds to pay benefits, fiscal fools in Congress had cut the employee half of the Social Security tax from 6.2% to 4.2%. Those who are self-employed also enjoyed a 2% reduction in their obligation. This payroll tax holiday ended in 2012. For 2013, you'll pay an additional 2% on as much as $113,700 of income or as much as $2,274.

Dividends

Qualified dividends are still taxed at a reduced rate. For those at the $400,000/$450,000 income level, the top rate was increased from 15% to 20%. That's still a lot lower than the 39.6% dividend rate originally proposed by the Obama administration. "Qualified" dividends are those held for an extended period. Technically, you start with the ex-dividend date, the date on which the company looks at its books for a list of shareholders who will get the dividend, then go back 60 days and forward 60 days. If you held the stock for any 60 days during that 121 day period, the dividends are "qualified" for the lower rate.

Jeff Schnepper

Jeff Schnepper

Capital gains

The top tax on net long term capital gains also jumped from 15% to 20%, but only for those at the $400,000/$450,000 income levels. To qualify as "long term," the asset must have been held for more than one year. Exactly one year or less defines your gain as short term, subject to a rate as high as 35%, up to 39.6% for those at the $400,000/$450,000 level.

For those in the 10% or 15% tax bracket, both qualified dividends and long-term capital gains continue to be taxed at a 0% rate.

3.8% Medicare surtax

This wasn't part of the fiscal cliff deal, but you better be aware of it if you earn more than $200,000 ($250,000 for joint filers). Any investment income (interest, dividends, rents, royalties, distribution from non-qualified annuities, income from passive activities, etc.) above that income level will be hit with an additional 3.8% Medicare surtax. So, if you're a single filer with $230,000 in income, of which $30,000 is investment income, you face an additional tax of $1,140 ($30,000 at 3.8%). That brings the potential tax on short term dividends for high-income taxpayers to as much as 43.4% (39.6% plus 3.8%).

Alternative Minimum Tax fix

This awfully mean tax is a required alternative minimum tax computation that claws back certain deductions, such as taxes paid and miscellaneous itemized deductions, denies you any deductions for personal exemptions, gives you an exemption deduction that disappears as your income increases, and applies a flat 26%/28% rate on the balance. You pay the higher of the AMT or your regular tax.

The exemption amount was scheduled to fall to $33,750 ($45,000 on joint returns). Had that happened, as much as an additional 100 million taxpayers would have been hit with an AMT-created tax increase. The new deal increases the exemption to $50,600 ($78,750 for joint returns) and indexes it for inflation for future years.

State and local sales tax deduction

You can elect to deduct state and local sales taxes in lieu of income taxes as an itemized deduction on your Schedule A. This is a great benefit for taxpayers living in states without a state income tax, such as Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas and Wyoming.

The new tax deal extends this deduction for 2012 and 2013.

Teacher's tax deduction

From Jan. 1, 2002, through 2011, you got an above-the-line deduction (you didn't have to itemize) of up to $250 for expenses paid for books, supplies, computer equipment and supplementary materials if you qualified as an eligible educator. The IRS defines that as a kindergarten through grade 12 teacher, aide, instructor, counselor or principal in a school for at least 900 hours during the year.

The new tax deal extends this deduction for 2012 and 2013.

Benefits

The new law makes permanent the $5,250 exclusion for employer-provided education assistance for college and graduate school education. It also extends through 2013 the monthly exclusion from income for employer-provided mass transit benefits from $125 to $240, and makes permanent the $10,000 tax exemption for adoption expenses paid by your employer. Also made permanent was the $10,000 tax credit (a credit is a dollar-for-dollar reduction in your tax) for families that pay for their adoption expenses.

Estate taxes

Scheduled to drop to $1 million, the estate tax exclusion was raised to $5 million with a 40% top rate (the top rate for 2012 was 35%). Portability of a spouse's unused exclusion amount was made permanent. That means that there is now zero federal estate tax on a married couple unless their combined estate is more than $10 million.

Unless indicated otherwise, the above changes are permanent. Note also that when the law refers to "income" here, it means taxable income, after all deductions.

Extensions

The new deal extends for five years the $1,000 child tax credit (which would have dropped to $500), the earned-income tax credit and the $2,500 American Opportunity Tax Credit for college tuition.

It also extends for two years (2012 and 2013) the tax free distribution of direct charitable donations of IRA assets up to $100,000 for taxpayers age 70 1/2 or older. That means such distributions are not included in income and don't reduce deductions that must exceed a percentage of your adjusted gross income to be allowable – e.g. the 10% floor for medical expenses and the 2% floor for miscellaneous itemized deductions.

Jeff Schnepper is the author of the best-selling book "How to Pay Zero Taxes," which is in its 30th edition. He is a former professor of taxation, accounting and finance. Schnepper now has a full-time tax planning and legal practice in Cherry Hill, N.J. Click here to find Schnepper's most recent articles.

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