We have heard a lot of back and forth about the fiscal Cliff and the proposed changes. The following are the proposed changes by the Administration taken from the 215 pages the Department of Treasury report. All of the changes put forth the following reason – or a modification of the reason:
“Limiting the tax benefit of upper-income taxpayers’ would reduce the deficit, make the income tax system more progressive, and distribute the cost of government more fairly among taxpayers of various income levels.” That being said… here are the proposals, somewhat simplified.

Itemized deductions would be reduced by 3% of the amount by which the AGI exceeds statutory thresholds. The thresholds would be $250k for married filing joint, $200k for single taxpayers.

Reinstate the personal exemption phase-out from the current $3800 to $2500. The thresholds are the same as above.

Reinstate the 36% and 39.6% tax rates by replacing the 33% and 35% tax brackets with these rates. The thresholds are the same as above.

Tax on qualified dividends as ordinary income will expire for income that is taxable at the new 36 and 39.6% brackets. All dividends will be taxed as ordinary income for these taxpayers.

Net long-term capital gains tax restored to 20%. It would also repeal the special reduced rate on gains from assets held over 5 years. (Editorial note: keep in mind an increase from 15% to 20% is an additional 25%, not a 5% increase).

All of this will go into effect 12/31/12 if there is no compromise.

Disclosures:http://www.hechteffect.net/?page_id=31