ENID, Okla. —
The Taxpayer Relief Act extended and, in some cases, made permanent a variety of expiring income tax provisions.
Many of the extensions will impact agricultural producers. This article discusses some of the major items that will directly affect farmers and ranchers.
The bill made permanent the 2012 ordinary income tax rates of 10, 15, 25, 28, 33, and 35 percent and added a new top rate of 39.6 percent applicable for 2013 and beyond. The 39.6 percent rate will impact single filing taxpayers making more than $400,000 and impact married filing joint taxpayers making more than $450,000.
Long-term capital gains rates for non-corporate taxpayers also were made permanent, and a new top rate was added for tax years beginning after Dec. 31, 2012.
The capital gain rates are zero percent for taxpayers in the 10 and 15 percent marginal tax brackets, 15 percent for taxpayers in the 25 through 35 percent marginal tax brackets, and 20 percent for taxpayers in the 39.6 percent marginal tax bracket.
In addition, the tax treatment for qualified dividends was retained. They will be taxed at the same rates as long-term capital gain. Qualified dividends will be taxed at zero percent for taxpayers in the 10 and 15 percent marginal tax brackets, 15 percent for taxpayers in the 25 through 35 percent marginal tax brackets, and 20 percent for taxpayers in the 39.6 percent marginal tax bracket.
The 2.0 percent temporary payroll tax cut that was extended for the 2012 tax year was not extended for tax years beginning after Dec. 31, 2012. This cut reduced the amount of the self-employment tax as well as the employee portion of the payroll tax by 2 percent for 2012.
The special 50 percent bonus depreciation will continue to be in effect for 2013. To qualify for bonus depreciation, new depreciable property must be purchased and placed in service before January 1, 2014.
In addition, the Section 179 expensing amount has been reinstated at the $250,000 for both the 2012 and the 2013 tax year.
This provision applies to either new or used business property purchased and placed in service in 2012 or 2013. The investment limit also was increased to $500,000 for these tax years.
The act also has indexed the alternative minimum tax exemption amounts to the rate of inflation as well.
In the past several years the exemption amounts have had to be adjusted annually through federal legislation to minimize the negative impact on taxpayers.
The act has adjusted the exemptions for 2012 and will index those amounts in future years.
For additional information concerning these and other tax items contained in the Taxpayer Relief Act of 2012, be sure to consult with your tax preparer or adviser.
Hobbs is Oklahoma Cooperative Extension Service assistant extension specialist.