Unless you plan ahead, that is.
While it may be true that the vast majority of Americans will not be adversely affected by the American Taxpayer Relief Act of 2012 (ATRA) or California's Prop 30, those who will be impacted will definitely feel the pinch.
And this is one pinch that will leave a noticeable mark. Indubitably!
- The top Federal Income Tax Rate increased from 35% to 39.6% - a 13.1% tax hike
- The top California State Income Tax Rate (including the 1% Proposition 63 Mental Health Services Act tax for incomes over $1,000,000 and the recently passed "temporary" Proposition 30 tax) increased from 10.3% to 13.3% - a 29.1% tax hike
Combined, top California taxpayers will send about 53 cents of every dollar earned over this threshold to the United States Treasury or Franchise Tax Board.
This gives California the dubious distinction of now having the highest marginal tax rate in the country.
Just ask Phil Mickelson how he feels about his tax hike.
And we're not even including the impact of things like the new 3.8% Section 1411 Medicare Surtax on certain income, the Alternative Minimum Tax (AMT) modifications and phase-outs, changes to capital gains income, etc. all of which combine to create an even greater sense of financial preparation urgency for certain people.
What's a Poor High Income Taxpayer To Do?
While you're not likely to gain a lot of sympathy for your cause from those in the lower tax brackets, you'd be hard pressed to find anybody advocating that you should actually pay more taxes than required.
Besides, all is not lost. You CAN still lighten your load.
"I'm proud to pay taxes in the United States. The thing is, I could be just as proud for half the money."
- Arthur Godfrey -
In our practice, we specialize in helping two unique groups of taxpayers who routinely encounter tax challenges which can easily be overcome with proper planning:
Plaintiffs Anticipating Taxable, Non-Physical Injury Settlements
(Click titles above for link to more detailed information on subject of interest)
Unlike traditional structured settlements which are often simply a very good idea and remain quite popular, structuring known taxable income where tax savings are 100% quantifiable is crucial to keeping more of what you worked hard to earn.
In short, for those in certain income tax categories (and putting a little twist on the old Fram Oil Filter ad punch line) it's a simple mathematical question of choosing to either . . .
"Pay More Now
orPay Less Later
Seems like an easy choice to us.
Ask Your CPA
We understand that you may not always be in the financial position to take advantage of this unique tax-saving opportunity. But if you qualify and you really would rather keep more of your own money and sleep better at night, you owe it to yourself and your family to explore the possibilities of structuring your eligible funds.
Once your accountant green-lights this strategy (we're confident this will be the case), call us to let us know how we can help you:
- Structure Your Taxable Settlement
- Structure Your Attorney Fee