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Posted: 9/23/2012 5:34:55 PM
Most folks know about this tax hike so I'm asking for advice. What would be some useful strategies to employ before the end of the year?


100 Days Until Taxmageddon

Sunday will mark the start of the 100-day countdown to “Taxmageddon” – the date the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2013:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for small business owners, families, and investors (later re-upped by President Obama and Democrat Congress in 2010). The following tax hikes will occur on January 1, 2013:

Personal income tax rates will rise on January 1, 2013. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which the majority of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

-The 10% bracket rises to a new and expanded 15%

-The 25% bracket rises to 28%

-The 28% bracket rises to 31%

-The 33% bracket rises to 36%

-The 35% bracket rises to 39.6%

Higher taxes on marriage and family coming on January 1, 2013. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of taxable income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level.

Middle Class Death Tax returns on January 1, 2013. The death tax is currently 35% with an exemption of $5 million ($10 million for married couples). For those dying on or after January 1 2013, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors on January 1, 2013. The capital gains tax will rise from 15 percent this year to 23.8 percent in 2013. The top dividends tax will rise from 15 percent this year to 43.4 percent in 2013. This is because of scheduled rate hikes plus Obamacare’s investment surtax.

Second Wave: Obamacare Tax Hikes

There are twenty new or higher taxes in Obamacare. Some have already gone into effect (the tanning tax, the medicine cabinet tax, the HSA withdrawal tax, W-2 health insurance reporting, and the “economic substance doctrine”). Several more will go into effect on January 1, 2013. They include:

The Obamacare Medical Device Tax begins to be assessed on January 1, 2013. Medical device manufacturers employ 409,000 people in 12,000 plants across the country. This law imposes a new 2.3% excise tax on gross sales – even if the company does not earn a profit in a given year. Exempts items retailing for <$100.

The Obamacare Medicare Payroll Tax Hike takes effect on January 1, 2013. The Medicare payroll tax is currently 2.9 percent on all wages and self-employment profits. Starting in 2013, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate.

The Obamacare “Special Needs Kids Tax” comes online on January 1, 2013. Imposes a cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare cap harms these families.

The Obamacare “Haircut” for Medical Itemized Deductions goes into force on January 1, 2013. Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2013, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. These tax increases will be in force for BOTH 2012 and 2013. The major items include:

The AMT will ensnare over 31 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 31 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.

Full business expensing will disappear. In 2011, businesses can expense half of their purchases of equipment. Starting on 2013 tax returns, all of it will have to be “depreciated” (slowly deducted over many years).

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.



Posted by Ryan Ellis on Friday, September 21, 2012 10:19 AM EDT
die-tryin
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Posted: 9/23/2012 5:42:07 PM
YEA!!! We're Fucked !! Thanks obamalattadingdong.
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ruger556boy
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Posted: 9/23/2012 7:56:02 PM
But, but, but... I was told Obama has lowered taxes on americans.
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Posted: 9/23/2012 8:24:27 PM
The 1st and 3rd wave will probably be averted with an extension of the Bush cuts and an AMT patch. Wave 2 will take effect and will cause enough damage.
Appleby
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Posted: 9/23/2012 8:37:37 PM
Ya but none of that applies to us normal people. It's just the RICH 1% folks who need to pay more taxes. So don't worry, we won't have pay any more...we're the middle class.

And if you believe that crap then I've got a bridge to sell you....
MoparMike
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Posted: 9/24/2012 1:37:29 AM
Tagscribe.


Is there a site with this on it that will appear unbiased to either party? I'd like to pass this on to a few people. [:)[

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misc
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Posted: 9/24/2012 2:12:59 AM
http://atr.org/
Drudgereport.com linked to this site. Read the mission statement. Irregardless of your political stance it will happen. I work for the post office and I printed several 2 page copies next to two time clocks. The next day they were gone. The union doesn't like their president looking bad. Never mind it's the union membership and non union that get hurt. You have to be smoking a fine brand of crack to think you'll get a free pass.
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Posted: 9/24/2012 8:20:53 AM
Originally Posted By misc:
http://atr.org/
Drudgereport.com linked to this site. Read the mission statement. Irregardless of your political stance it will happen. I work for the post office and I printed several 2 page copies next to two time clocks. The next day they were gone. The union doesn't like their president looking bad. Never mind it's the union membership and non union that get hurt. You have to be smoking a fine brand of crack to think you'll get a free pass.


What will happen? All of these tax law changes? Pfffft. The .gov extended the Bush cuts thru 2012, and will most likely do so again. Also, the AMT gets patched every year, usually in late November or December. The congress and the prez will work some kind of deal. But the ACA alone has enough in it to further cripple business. What's interesting to note is there are credits available for small businesses that provide some sort of health insurance, and MOST businesses are passing on even trying to obtain the insurance and the credits. The cost of compliance around this ACA is incredible.

zutmeloda2003
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Posted: 9/26/2012 4:38:47 PM
how can people want to vote for this F*&^tard again?????
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Posted: 9/26/2012 5:21:03 PM
Originally Posted By zutmeloda2003:
how can people want to vote for this F*&^tard again?????


Over 40% of Americans pay NO income tax. The Tax Foundation wrote a piece not long ago wherein they talk about "fiscal illusion." Those folks that pay no tax at all have no concept of cost of governance. It made me think that they have no skin in the game, therefore they have no "pain" from taxes like many of us. They are the ones that will keep voting democrats into power.
Rick_NE
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Posted: 9/27/2012 8:53:44 AM
-The 10% bracket rises to a new and expanded 15%

-The 25% bracket rises to 28%

-The 28% bracket rises to 31%

-The 33% bracket rises to 36%

-The 35% bracket rises to 39.6%



What income levels are associated with each bracket?
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die-tryin
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Posted: 9/27/2012 10:37:53 AM
[Last Edit: 9/27/2012 10:40:34 AM by die-tryin]
http://www.mondaq.com/unitedstates/x/178778/Income+Tax/2013+Federal+Income+Tax+Update

Some other effects. Im looking for the actual 2013 tax bracket break down now.

*apparently the 2013 tax bracket break down hasnt been released yet as they dont know if the tax cuts will get renewed or not.
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TexasDoubleTap
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Posted: 9/27/2012 10:45:16 AM
If the assclowns in DC would just pick a number and say "that's your rate for the next 10 years" businesses could FINALLY figure out their fucking overhead cost.


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Rick_NE
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Posted: 9/27/2012 11:13:38 AM
Originally Posted By die-tryin:
http://www.mondaq.com/unitedstates/x/178778/Income+Tax/2013+Federal+Income+Tax+Update

Some other effects. Im looking for the actual 2013 tax bracket break down now.

*apparently the 2013 tax bracket break down hasnt been released yet as they dont know if the tax cuts will get renewed or not.


Ballpark figures would be fine, I have had a CPA do my taxes for the last few years and have no idea what the brackets equate to.


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Posted: 9/27/2012 11:41:29 AM
As indebted as this country is right now, we need severe cuts on government spending AND slightly higher taxes.

Now if the market will bear that... I dont know.
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Posted: 9/27/2012 12:02:29 PM
Originally Posted By Rick_NE:
Ballpark figures would be fine, I have had a CPA do my taxes for the last few years and have no idea what the brackets equate to.

http://novelinvestor.com/tax-planning/2012-federal-income-tax-brackets-released-by-irs/
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Posted: 10/10/2012 6:04:01 PM
How does nobamacare change capital gains tax? I'm trying to sell rental properties to reinvest into bigger/better and I'm thinking that it may not be worth it. Also related, whats this 3% that the seller of a home has to pay at closing to go to support his healthcare?
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Posted: 10/10/2012 9:48:25 PM
Originally Posted By jeeper12:
How does nobamacare change capital gains tax? I'm trying to sell rental properties to reinvest into bigger/better and I'm thinking that it may not be worth it. Also related, whats this 3% that the seller of a home has to pay at closing to go to support his healthcare?

The 3.8% capital gains tax doesn't apply to all real-estate transactions, only sales of investment properties, vacation homes, land, etc. IF your annual income is over $200k single / $250k married.
http://www.biggerpockets.com/renewsblog/2012/07/03/obamacare-real-estate-investment-tax-health-care/
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Posted: 10/20/2012 11:28:56 AM
Will I be hit if I sell my house and exceed the 250k tax free part? The way I read it I will have capital gains and 3.85% sales tax.

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Posted: 10/21/2012 7:02:54 PM
Do these changes go into effect for 2013 earnings, or 2012 earnings filed on your tax return in 2013?