Fiscal Cliff Averted: Details of the Deal

An agreement was reached late Monday between the White House and Senate Minority Leader Mitch McConnell (R-Ky.) aimed at averting wide tax increases and budget cuts scheduled to take effect in the new year, and passed late early Tuesday morning by the Senate.

Late Tuesday night, the House, too, passed the bill on a bipartisan vote that divided the Republican leadership. The measure will raise taxes by about $600 billion over 10 years compared with tax policies that expired at midnight Monday. It also delays for two months across-the-board cuts to the budgets of the Pentagon and numerous domestic agencies.

The bill now goes to President Barack Obama for his signature.

Here are some key points of the deal:

• Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts will be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.

• Estate tax: Estates will be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.

• Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families will increase from 15 percent to 20 percent.

• Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.

• Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, earned income tax credit, and an up to $2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.

• Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.

• Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.

• Social Security payroll tax cut: Allows a 2 percentage point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.

• Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rules changes on converting traditional individual retirement accounts into Roth IRAs.

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elescofilm

As as wise Czech once said, and I paraphrase, "What worries me is not whom Americans elect but the Americans who elected him"

January 02 2013 at 1:42 PM Report abuse rate up rate down Reply
stock market

I heard on a money talk channel that there will be a tax break for Hollywood movie producers. Anyone else hear that? We are still in a Fiscal Cliff.....

January 02 2013 at 10:44 AM Report abuse +1 rate up rate down Reply
1 reply to stock market's comment
janeswizzle

Micheal Moore ?

January 02 2013 at 10:45 AM Report abuse rate up rate down Reply
tdunkailo

THIS COUNTRY GOT WHAT THEY VOTED FOR.YOU ALL MADE A BIG MISSTAKE FOR OUR CHILDREN /GRANDKIDS FURTURE .NEXT TIME VOTE WITH YOUR HEARTH NOT THE PARTY

January 02 2013 at 10:43 AM Report abuse -1 rate up rate down Reply
marilynbibbee

Funny how they forgot to mention all the corporate goodies in the bill. I think the s*h*i*t will hit the fan later today. We've been robbed again.

January 02 2013 at 7:55 AM Report abuse +4 rate up rate down Reply
dad6162

If this mess in Wash. isn't a clear reason why we need term limits on congress, I don't know what is.Congress is the problem, not the solution.

January 02 2013 at 6:36 AM Report abuse rate up rate down Reply
1 reply to dad6162's comment
janeswizzle

So which congress people do you think will vote for shortening their terms?

January 02 2013 at 10:47 AM Report abuse rate up rate down Reply
jrb359

No cuts in spending? The problems in this country will continue as long as there is the failed president in the white house and a democrat controled senate.

January 02 2013 at 6:20 AM Report abuse +2 rate up rate down Reply
John

One of the most important thing to remember in our Democracy is that "Liberty requires Responsibility" on every American who live in this country. It does'nt matter how difficult the Task, the true spirit of being free to make choices for or against complicated issues without resorting to violence is to give praise to the wisdom of those who represents us in our Local, State and National Government.Todays decision from the National level of Government was a wise decision on the part of both Parties, Democrat and Republicans alike. It truly would have been embarrasing if these representatives would have allowed this difficult task to have been left for the year 2013 to be resolved.Be reminded, we are indeed one of the leading Nations of the World and we do not want to ever lose our position of being a leader. We have an excellent President to lead us and even he is not beyond compromise in reference to caring out the will of the American People. I strongly urge everyone of us to support the President in his striving on our behalf and keep the pressure on your representatives in Washington, (Democrats and Republicans). Congress still have work to do.

January 02 2013 at 2:49 AM Report abuse -3 rate up rate down Reply
michael.mouser

Unemployment is a privalage and I do believe it is necessary (BUT IT SHOULD NEVER BE CONSIDERED AN ENTITLEMENT). Therefore, why doesn't the gov't (local, state, or federal) provide a program to put the persons using unemployment to work for a minimum of 20 hours a week. That would still provide PLENTY of time to interview, update the resumee, and search for a job. AND this will help the states complete work that may NOT be otherwise completed (blue-collar or white-collar jobs). That way the tax payer recieve something from the tax $ spent for the individuals NOT working but recieving $. It would also provide more of an incentive for the individuals to get a job--that they may be too PROUD to do otherwise. EG. I have a problem providing an executive a proportion of what he would have been paid (should he still have his job) for a whole year just because he can't get the job that provide him/her the large amount of $ he was USED to.

January 02 2013 at 1:08 AM Report abuse +2 rate up rate down Reply
michael.mouser

Why do they preach that we need to contain this frivolous spending and the reduce the debt rate when they turn around and continue the federal unemployment compensation insurance to a year. That costs US an ADDITIONAL $30B dollars when this so-so called tax measure will generate $600B (5%). It is the states' responsibility and not the federal government to provide unemployment. They say that this will save 300,000 jobs, but you aren't saving jobs when taxpayers are paying your salery while your NOT working. A year is entirely toooo long. I'm sorry, but an individual may HAVE to decrease their standards sometimes and swallow their pride if they go even 4 months without finding the job that they are used to.

January 02 2013 at 12:55 AM Report abuse rate up rate down Reply
srfrbn

time for Obama to go

January 01 2013 at 10:15 PM Report abuse +2 rate up rate down Reply