January 2013 Newsletter                                                              Experience - Integrity - Accuracy 

Fiscal Cliff Hilights
New Taxes For 2013 - Will They Impact You?

For the past two years we have enjoyed a 2% reduction in our employment taxes.  That reduction has expired.  Expect your withholding to increase by 2%.  2013 will also witness the imposition of  2 additional medicare taxes.  The first is an additional employment tax of .9% on earnings.  The second is a surtax of 3.8% imposed on net investment income.  Both of these taxes will be effective for taxpayers with incomes over $200,000 for singles or $250,000 for married filers.  Taxpayers with income under these threshold amounts will not pay this additional tax.  For taxpayer's near or above this threshold, tax planning will become a bit more complicated.  Where possible, steps might be taken to keep income under $200,000 to avoid the additional taxes altogether.  If its not possible to keep total income down, it might be possible to lower net investment income through the taking of capital losses and avoid some of the surtax.  
 
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Capital Gains Taxes Rise -Top Rates Rise - Some Cuts Made Permanent

Once again congress has passed a major tax bill at the last minute.  Here are some of the major provisions in the New Year’s Day legislation:
  • Return to the top rates to 39.6% for ordinary income and 20% for capital gains and dividends (not including the new 3.8% Medicare Tax) for income over $400,000 (single) and $450,000 (joint)
  • Reinstate the phaseouts for personal exemptions and itemized deductions at income levels of $250,000 (single) and $300,000 (joint)
  • Make the $5 million estate and gift tax exemption permanent (indexed for inflation) but raise the rate from 35% to 40%,
  • Permanently index the alternative minimum tax (AMT) for inflation
  • Retroactively extend tax provisions like the research credit
  • 50% bonus depreciation for qualified property placed in service in 2013
  • 2001 and 2003 tax cuts made permanent for income under $400,000 (single) and $450,000 (joint) including:
            $1,000 Child Tax Credit
            $10,000 Adoption Credit
            Rate cuts
            Student loan interest deductions
            And several other provisions.

The bill also extends, but does not make permanent, the tuition credits, the enhanced child credit, and certain enhancements to the earned income tax credit.  These provisions have been extended for three years.

This New Year's agreement addressed only the revenue side of the fiscal cliff issues.  The spending cuts have been put off for two months.  I would expect revenue and tax issues to remain on the table until the spending, debt, and budget issues are resolved.

 

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Fox Accounting & Tax Services, Inc.
Enrolled Agents
(503) 246-6994

 


10151 SW Barbur Blvd. Suite 106D
Portland, OR 97219         
[email protected]
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