|
Expiring "Bush Tax Cuts"
The so-called Bush tax cuts are scheduled to expire at the end of the year. Although some of the cuts retain bipartisan support in Congress and may yet be extended, as of now, Washington has some severe changes in store for you and your family.
Here are the highlights of the changes in store:You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Capital Gains/Qualified Dividends
The current maximum tax rate on long-term capital gains and qualified dividends is 15%, with lower income filers receiving a 0% tax rate. In January 2013 the capital gains would be a maximum of 20%, and qualified dividends would resume being taxed at the regular tax rate of the filer, which could be as high as 39.6%.
|
Tax impact of "Obama Care"
Effective January 2013 the following tax increase will become effective
Surtax on Investment Income:
This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 for singles).
Assuming the Bush tax cuts expire, the increase would result in the following top tax rates on investment income
|
|
Capital Gains
|
Dividends
|
Other*
| |
2012
|
15%
|
15%
|
35%
| |
2013
|
23.8%
|
43.4%
|
43.4%
|
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.
|
