Coyle Financial Counsel is committed to collaborating with CPAs and tax advisors to produce an optimal result for our clients. To that end, Frank J. Basile will help us think through some of the tax changes and how it affects you in 2013 and beyond. Frank J. Basile, of F.J. Basile, CPAs, P.C., has offices in New Hartford, NY, and Naples, Florida.
[caption id="attachment_466" align="alignright" width="150"] Frank J. Basile, CPA[/caption]
Unless Congress acts before December 31, 2012, American taxpayers are in for some expensive increases in their 2013 income tax bills. An unprecedented number of tax provisions are set to expire at the end of 2012 and new tax provisions that were part of the Health Care Act are set to take effect in 2013. Some economists predict the total cost to taxpayers could reach $130 billion if nothing is done.
The changes in these tax provisions will impact all tax brackets, not just the higher brackets.
In fact, one of the most substantial changes is to the actual tax brackets themselves. Beginning in 2013, the bottom tax bracket of 10% will be eliminated and replaced by a 15% bracket. The top bracket will be set at 39.6% instead of the current 35% and all the brackets in between will be increased by 3% each.
All taxpayers with investment income will have higher taxes due to scheduled changes to the tax rates on capital gains and dividends.
Currently, the maximum federal rate on long-term capital gains and qualifying dividends is only 15%. Starting next year, the maximum rate on long-term capital gains is scheduled to increase to 20% (or 18% on gains from assets acquired after December 31, 2000, and held for over 5 years), and the maximum rate on dividends will soar to 39.6%. Also, right now, an unbeatable 0% rate applies to long-term capital gains and dividends collected by taxpayers in the lowest two rate brackets of 10% and 15%. Starting next year, taxpayers in the two lowest brackets (15% and 28%) will pay 10% on long-term gains (or 8% on gains from assets acquired after December 31, 2000, and held for over 5 years) and 15% and 28% on dividends (compared to 0% now).
"Collecting more taxes than is absolutely necessary is legalized robbery." -Calvin Coolidge
The PEP (personal exemption phase-out) and Pease (limitation on itemized deductions) provisions will be reinstated to their original levels, projected to be $174,750 for single taxpayers and $261,650 for married taxpayers filing jointly. This means for taxpayers with adjusted gross income in excess of these amounts, they will lose the benefit of the personal exemptions and their itemized deductions will once again be limited. Changes are looming in the calculation of the Alternative Minimum Tax (AMT) and the outlook is not favorable for Congress to continue the annual practice of enacting a "patch" legislation to limit the tax effect of the AMT.
In Part 2, we will look at the effects on wage earners, self-employed, gifts and estate tax.
In Part 3, we will discuss some strategies to minimize the effects of these changes.
We would love to talk to you to see how these changes will affect you and your family. Give us a call:
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Posted on Tue, January 15, 2013