Home sellers. For legions of would-be sellers whose mortgage balances are larger than the home's market value, the legislation extends important tax relief. Borrowers will still be able to arrange a "short sale," when the lender agrees to accept less than the full balance due on the mortgage, without having to treat the forgiven debt as taxable income. That's good news for the housing market, because short sales are a major alternative to foreclosure for would-be home sellers.
Working people. The expiration of a temporary payroll-tax cut means that workers will again pay 6.2 percent of their paychecks toward Social Security, up from last year's level of 4.2 percent. When Medicare taxes are added in, and the share paid by both employers and employees is included, payroll taxes devour more than 15 cents of every dollar in wages.
Inheritors. The estate tax rate will rise to 40 percent, from 35 percent in 2012. The tax will affect estates valued above $5 million.
Income tax filers. Most Americans will see no change in their income-tax rates, and they'll enjoy relief from annual worry about whether Congress will "patch" the Alternative Minimum Tax (AMT). The deal includes a permanent provision for adjusting AMT liability for inflation. That protects millions of Americans from being snared with higher taxes by a tax provision designed to ensure that the very rich don't dodge too many taxes. The deal also includes a five-year extension of Obama's American Opportunity Tax Credit (for college costs) and of his expanded Child Tax Credit and Earned Income Tax Credit.
Individuals making $250,000 or more, and couples making $300,000 or more, will have new limits on their personal exemptions and itemized deductions.