MDNews - San Antonio

+++++++++++++++++++ + +++ + ACCouNTING ��� +++ +++++++++++++++++++ New Year, New tax Laws AS we eNTer THe new year, there is still some uncertainty as to what will happen with the tax laws in 2013. It is likely that the president and Congress will reach a compromise agreement retroactive to January 1, 2013. However, the compromise agreement and what it will contain is far from certain. What we do know for sure is that if nothing is done, taxes will increase in 2013. income Tax Changes for 2013 The following table shows how rates would change as a result of the expiration of the Bush tax cuts: 2012 2013 10% n/a 15% 15% 25% 28% 28% 31% 33% 36% 35% By Bennett Allison 39.6% In addition, qualified dividends, which have been taxed at a maximum rate of 15%, are now taxed at ordinary rates up to 39.6%. Long-term capital gains, which have been taxed at a maximum rate of 15%, will now generally be taxed at a maximum rate of 20%. ACTioN To Be TAKeN: Taxpayers may consider the following options to help mitigate the effects of the higher tax rates. + Maximize the use of tax-deferred vehicles such as 401(k)s, IRAs, life insurance and annuities. + Consider a more tax-efficient investment portfolio (e.g. more focus on long-term growth with less current income and less turnover; more focus on tax-exempt interest). + Consider all tax deductions (business and personal) throughout the year and keep meticulous records. 10 | San Antonio MD News ��� MdNewS.CoM Medicare Tax Changes for 2013 For single taxpayers earning more than $200,000 per year and married taxpayers earning more than $250,000 per year, a new Medicare tax will be assessed on wages, interest, dividends, rents and other passive income. Wages, which were already subject to a 2.9% Medicare tax, will see a 0.9% increase to 3.8%. Interest, dividends, rents and other passive income that were not previously subject to a Medicare tax will now be subject to a 3.8% rate. This means that a portion of a top earners��� income (i.e. more than $388,350) could be subject to tax rates as high as 43.4% (39.6% + 3.8%). An interesting exception is that earnings from an active business are not subject to the new Medicare tax. This means that business earnings from a partnership or S corporation in which the taxpayer is an active participant will be exempt from the new Medicare tax. ACTioN To Be TAKeN: Taxpayers may consider the following options to help mitigate the effects of the higher rates and new subject income categories. + Actively ma nage income to keep it below the $200,000 and $250,000 thresholds.

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