After Congress finally ended the fiscal cliff debacle, for now, I was in search of how exactly the tax brackets would look like. There's now a ridiculous 7 brackets, this isn't close to the most we've had but it seems overly complicated to me. The big news for investors is that one the brackets were made permanent, so hopefully tax planning will become easier in the future, or course barring future changes by Congress. The second is that long term capital gains and dividends will continue to be taxed at the same rate.
But now we have 3 different rates on those. If you're in the 10% or 15% income bracket your cap. gains/dividend taxes stay at 0%. In the 25% and higher bracket your cg/d taxes stayed the same at 15%, unless your AGI is above $200,000 for single or $250,000 MFJ, in that case you get the 3.8% Obamacare surtax. And for AGI's above $400,000 single and $450,000 MFJ, your cg/d taxes increased to 20% plus the Obamacare surtax of 3.8% for a total tax of 23.8%.
The 2% payroll tax cut was not extended. I personally think they shouldn't have started it in the first place, but was glad to use the extra money to invest.
For a more detailed breakdown check out TaxFoundation.org.
Overall it's not a big change for the majority of tax payers, although almost everyone will see their taxes go up thanks to the payroll tax cut not being extended. The biggest changes will be effecting really high earners.
The biggest disappointment is that only the tax side of the fiscal cliff was taken care of. Part of the bill that was passed just kicked the budget/spending cuts down the road 2 months. So barring a rare change of direction by Congress we can expect to have another potential market shakeup come late February/early March from Fiscal Cliff 2.0.