WASHINGTON, D.C. — The events and negotiations leading to passage of key legislation averting the so-called Fiscal Cliff were the big story on Capitol Hill this year. The House of Representatives passed the American Taxpayer Relief Act, H.R. 8, 257 to 167. The U.S. Senate passed it 89 to 7 earlier the same day. Many have said this action averted an increase in unemployment and an economic recession.
The bill permanently extended tax rates for families with annual incomes under $450,000 and individuals with incomes below $400,000. It also set a new tax rate on earners with income over $1,000,000 of 39.6%. The bill did not address cuts in government spending and delayed the sequestration requirements of the Budget Control Act for two months that coincides with the expected time the Treasury Department expects the United States may default on its obligations without an increase n the federal debt ceiling.
The extent of the business tax extenders is pretty impressive. MRAA strongly recommends marine retailers work with accountants to analyze how the bill impacts their businesses. However, some of prevalent tax extenders that may impact marine retailers include extension of 15-year straight-line cost recovery for qualified lease-hold improvements and qualified retail improvements, Section 179 increased expensing limitation (Businesses can deduct the cost of equipment placed in service for $500,000 for 2012 and 2013. It is set to revert to $25,000 in 2014), and permanent extension and certain modifications of the 2001 and 2003 Bush-era tax cuts (for example, sets the estate maximum tax rate at 40%).
In addition, the primary and secondary home mortgage interest deductions were permanently repeated for most taxpayers. However, Congress re-enacted the Pease Limitation on itemized deductions for individuals with an adjusted gross income greater than $250,000 and joint filers with AGIs greater than $300,000. The Pease Limitation would reduce the total amount of itemized deductions by 3% of the AGI that exceeds these two thresholds. MRAA believes repeating the secondary home mortgage interest deduction is very important to marine retailing.
