1. Taxes went up for all taxpayers – for one day. Technically, the existing tax cuts expired at midnight on December 31, 2012. While the tax deal reinstated cuts for most taxpayers retroactively, we did have higher taxes on January 1, 2013.
2. Republicans and Democrats finally agreed on a definition for “high-income earners” – those that will get a bump in tax rates. For this purpose, they point to $400,000 for individual filers and $450,000 for married couples.
3. Marginal tax rates for high-income earners will reach 39.6% in 2013. Together with surcharges under the Patient Protection and Affordable Care Act (the health care act), the rate is the highest it has been since 1986 when rates topped out at a whopping 50%.
4. Tax rates for all other taxpayers, the so-called “99%”, were not only extended under the deal but the tax brackets for those rates were permanently indexed to inflation.
5. The Patient Protection and Affordable Care Act lives on. Despite threats to cut those taxes which were introduced as part of the health care act, those taxes were not part of the deal.
6. The alternative minimum tax (AMT) got a permanent fix for the first time in more than 40 years. Exemption rates are now indexed for inflation which means that Congress will no longer have to implement a “patch” each year. Without the patch for 2012, the IRS had warned that more than 100 million taxpayers might not be able to file on time in 2013.
7. The payroll tax cuts were not part of the deal. The payroll tax “holiday” which gave workers a 2% cut in the contribution rate for Social Security taxes was allowed to expire.
8. Emergency unemployment insurance benefits for the long-term unemployed have been extended for one year – at a cost of $30 billion. A lapse in benefits would have affected more than 2 million Americans. About 12 million job-eligible Americans are currently without employment.
9. Death and taxes remain certain. The federal estate tax was not repealed (as Republicans had hoped) and was instead made permanent with a $5.12 million per person exemption indexed for inflation.
10. It’s not over yet. While the tax cuts have been made permanent, a showdown over spending is looming for February.
