Cliff Deal Would Extend Tax Cuts For Households Up to $450,000

By Chris Frates

Updated: December 31, 2012 | 10:45 p.m.
December 31, 2012 | 1:53 p.m.

Senate Minority Leader Mitch McConnell of Ky. walks toward the Senate floor on Capitol Hill in Washington, Monday, Dec. 31, 2012. McConnell said Monday that he and the White House have agreed on preventing tax hikes that the "fiscal cliff" will trigger after midnight. And he says they are very close to an overall deal that would also prevent budget-wide spending cuts. (AP Photo/Susan Walsh) (AP Photo/Susan Walsh)

Talks between Senate Republican Leader Mitch McConnell and Vice President Joe Biden have resulted in key tax provisions as the two worked to finish a compromise that would avert the fiscal cliff of tax hikes and drastic spending cuts poised to hit economy starting Jan. 1.

Income tax rates would go up to Clinton-era rates on individuals making more than $400,000 and families making more than $450,000. The Bush-era tax cuts would be made permanent for everyone under that threshold. Those below the threshold would see a permanent 15 percent capital gains and dividends rate, and those above the rate would pay 20 percent.
The estate tax would be exempted on the first $5 million, and assets over that amount would be taxed at 40 percent. Current law exempts the first $5 million and taxes the rest at 35 percent, but that expires today and reverts to 55 percent tax rates on assets more than $1 million on Jan. 1.
A permanent "patch" for the Alternative Minimum Tax, which was meant to make sure millionaires paid their fair share of taxes, but which has increasingly ensnared the middle class.
A five-year extension on the American Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit.
Democrats and Republicans are still working on how to prevent across-the-board spending cuts that begin next year.

Read here for more details on what's in the tentative deal.

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