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BUSH TAX CUTS EXPIRE — WHAT DOES IT MEAN? IF By Rich Weidrick, CPA/PFS THE BUSH TAX cuts are left to expire on December 31, 2012, individuals will face increased taxes. Below is a summary of what could happen to high income individuals for 2013 and beyond. The top tax rate for ordinary income will increase to 39.6%. This would include short-term capital gains. Currently the top rate is 35%. + Maximum tax rate on long-term capital gains increases to 20% from 15%. + Dividend income will no longer be taxed at 15% but rather ordinary income rates which could be as high as 39.6%, + An additional 3.8% Medicare tax on investment income discussed in detail in another article. + Phase outs for personal and depen- dency exemptions return. Of all the changes, the most damaging could be the increased tax on dividend income. When the tax cuts were first implemented the dot com bubble was still on everyone's mind. Prior to the bubble bursting, stocks grew at rates which were not supported by their underlying fundamentals. Irrational exuberance or an easy money attitude became prevalent. 'Mortgage the house and invest in the market' was the battle cry of the day. The preferential treatment of dividends put investor emphasis back where it belonged — on companies that generated excess cash and were able to distribute this cash in the form of dividend payments to shareholders. With increased taxes on dividend income the intended target, the high Want a healthier practice? Call us for a check-up. For more than 30 years, physicians have called on the CPAs at Weidrick, Livesay, Mitchell & Burge to achieve their potential and remain successful. Our physician-focused business and accounting practices can help you • control your overhead • optimize your collections • minimize your personal and corporate taxes • plan for retirement • shelter and transfer wealth If you want a healthier, more viable practice, call us today. See what we can do for you. 330.659.5985 (Akron) • 330.722.5249 (Medina) 2150 N. Cleveland-Massillon Rd, Akron SEPTEMBER-OCTOBER 2012 ■ MDNEWS.COM ■ MD NEWS Cleveland-Akron-Canton | 35 income individual, will pay more. However, it could be argued that corpora- tions will become less concerned about returning excess cash to shareholders in the form of dividends. Individuals relying on fixed income are the unintended casu- alties. Retirees who have not been able to earn any real interest on savings turned to blue chip dividend paying stocks as an alternative. If dividend payouts do not continue, retirees will need to find yet another means to generate income. Rich Weidrick is a CPA and a principal of Weidrick, Livesay, Mitchell & Burge, LLC, in Akron. ■