They didn't get what they wanted …. But they
got what they needed.
Is it true that for a real
compromise to take place, everyone has to walk away a bit unhappy? If so, then
the American Taxpayer Relief Act passed
by Congress was the truest of compromises. While no one got all their wishes,
there are some surprising winners in the deal. Business writer Kent Hoover of
the Business Journal (Minneapolis-St. Paul) presented The
5 Winners of the Fiscal Business Awards:
- Small
Business. Most small businesses avoided higher taxes when the threshold for
increases was set at $450,000 instead of $250,000. Small business owners also
should benefit from the $5.12 million estate tax exemption ($10.24 for a
married couple), especially with the annual inflation adjustment. Finally,
small business owners can immediately expense up to $500,000 in capital
expenditures (such as new equipment), instead of having to claim depreciation
over time. (Without the deal, the Section 179 annual expensing limit would have
fallen to $25,000.) - Physicians.
Popularly known as the “doc fix,” Congress blocked a scheduled 26.5 percent
decrease in Medicare reimbursements to doctors. (Beware, though, this block is
only temporary, and doctors could face a decrease in 2014.) - Manufacturers
and Technology Companies. Many of these companies will take advantage of the
research and development tax credit, which provides incentives for companies to
do R&D in the U.S. - Utilities.
Congress kept the capital gains and dividends rate at 15 percent for households
earning below $450,000 (20 percent for households above that threshold). This
is in contrast to taxation at ordinary income tax rates as high as 39.6 percent
for wealthy Americans. According to Hoover, “That would have been bad news for companies, notably utilities, that
offer dividends in order to attract investors and raise capital. The steady
income that dividends provide loses its attractiveness when it's taxed at such
a high rate.” - Wind
energy, Hollywood and NASCAR. What would any tax code be without
special-interests? This deal is no different. The wind energy industry gets a production
tax credit for projects that begin construction this year. Hollywood studios
get tax breaks for doing their television and film production in the U.S. And NASCAR fans – for some reason Congress saw
fit to extend a tax break for "motorsports racing track facilities."
Surprised by any of these
so-called “winners” of the fiscal cliff deal? For a look at some of the other
industry-specific tax breaks, check out The
Wall Street Journal blog, “From
NASCAR to rum, the 10 weirdest parts of the ‘fiscal cliff’ bill.”
For more information about the
fiscal cliff, and how it affects you in Torrance, CA, please visit my estate
planning website.
Reference: Minneapolis-St. Paul Business Journal
(January 3, 2013,) “The 5 winners of the Fiscal Cliff Business
Awards are …