Crossing the threshold between the old and the new year and, more impressively, crossing the isle in a bipartisan effort, the White House and the Congress reached an agreement to avoid the fiscal cliff that threatened everyone’s hopes for 2013.

Income tax rates

While the 10%, 15%, 25%, 28% tax rates remain permanently untouched, and the 33% and 35% income tax rates remain the same for taxable income under $400,000 (single), $425,000 (head of household), and $450,000 (married filing jointly), earnings above these amounts will be taxed at a rate of 39.6%.

Personal exemptions

Personal exemptions are phased out for adjusted gross income over $250,000 (single), $275,000 (head of household) and $300,000 (married filing jointly).

Itemized deductions

The Clinton-era limits on itemized deductions are extended for individuals making more than $250,000 and couples earning more than $300,000.

Estate tax

Capital gains & dividends

Taxes on capital gains and dividends increase from 15% to 20% for income exceeding $400,000 for singles and $450,000 for families.

Alternative minimum tax

The alternative minimum tax exemption is permanently set for earnings of $50,600 (single) and $78,750 (joint filers) for 2012 and adjusts for inflation thereafter.

Social Security payroll tax

The payroll tax is restored to 6.2%, thus ending a 2% point cut enacted two years ago. As a taxpayer you should expect greater FICA withholding from your next paycheck.

Medicare

A 27% cut in Medicare payments to doctors is blocked for one year.

In 2013 taxable Medicare wages paid in excess of $200,000 are subject to an extra 0.9% Medicare tax that will only be withheld from employees’ wages. Employers will not pay the extra tax.

Unemployment benefits

401(k) plan

401(k) plan participants are permitted to convert their plan to a Roth plan, under which contributions are taxed going in but withdrawals are tax-free. The result is a short-term revenue boost now and more tax-free savings accounts.

Various extensions

Of course, more details are expected from the IRS and we will make sure to keep you updated and informed.

It may be now the perfect time to get a financial plan in place or review your existing plan, if you have one, with the assistance of a financial professional.