Highlights of the American Taxpayer Relief Act of 2012

The American Taxpayer Relief Act of 2012 – H.R. 8 (pdf) – passed on January 1, 2013 by a vote of 89-8 in the Senate and a vote of 257-167 in the House – takes steps to avert the so-called fiscal cliff by delaying scheduled across-the board spending cuts (“sequestration”) scheduled for many programs on January 1st and continuing many tax provisions scheduled to expire on January 1st. It includes a nine month extension of many (but not all) 2008 Farm Bill provisions, with no cuts to Supplemental Nutrition Assistance Program (SNAP) benefits or eligibility.

Specifically, the American Taxpayer Relief Act of 2012:

  • Extends emergency unemployment compensation for one year (estimated to assist two million people whose benefits would otherwise have expired);
  • Delays the “sequester’s” across-the-board cuts for two months. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and other low-income discretionary programs are among those included in a potential sequester. Not included in a sequester are SNAP, child nutrition, TEFAP commodities, and Commodity Supplemental Food Program;
  • Extends most of the tax cuts enacted in 2001, 2003, and 2010 for individuals with income below $400,000 and couples with income below $450,000;
  • Increases capital gains tax rates to 20 percent for individuals with income above $400,000 and couples with income above $450,000;
    Phases out personal exemptions and (partially) itemized deductions for individuals with income over $250,000 and couples with income over $300,000; and
  • Increases the estate tax rate from 35 percent to 40 percent for estates in excess of $5 million (level below which estates are exempt remains at $5 million for individuals and $10 million for couples – but is now indexed for inflation).
  • Extends for five years several tax credit provisions that were scheduled to expire: the Child Tax Credit, including refundability provisions passed in 2001 and 2009; simplification rules for the Earned Income Tax Credit (EITC), as well as the credit for families with three or more children; the higher credit rate of 35 percent for the Dependent Care Tax Credit, as well as the increase in eligible expenses to $3,000 for one child and $6,000 for two or more children; and the American Opportunity Tax Credit, which helps families pay for college.

The Act also extends the Farm Bill through the end of the 2013 Fiscal Year (9/30/13). It generally extends most provisions of farm policy as they were in effect on September 30, 2012. It does make some adjustments to how certain programs are funded for the duration of the extension. The Farm Bill extension:

  • Does not cut SNAP benefit levels or change current eligibility standards;
  • Continues funding for the Seniors Farmers Market Nutrition Program and the Community Food Projects;
  • Authorizes $79 million for SNAP’s employment and training programs for FY 2013 (continuing the reduction funding contained in FY 2012); and
  • Cuts $110 million from the nutrition education and obesity prevention grant program (SNAP-Ed) for FY 2013.

The American Taxpayer Relief Act of 2012 does not:

  • Extend the two percent payroll tax cut of the last two years, which means that employees’ Social Security FICA taxes will rise from 4.2 percent to 6.2 percent;
  • Increase the debt ceiling; and
  • Include an emergency disaster supplemental appropriations bill to address the needs of states affected by superstorm Sandy. While the Senate passed this separate bill, the House declined to vote on it.

Prepared by the Food Research and Action Center | Updated January 2, 2013