Vous êtes sur la page 1sur 5

2013FederalIncomeTaxUpdate

Overview
ThismaybethefinalyeartheBushtaxcutsremainineffectunlessCongressactstofurtherextend them.TheBushtaxcuts,enactedin2001and2003,wereoriginallyscheduledtoexpirefortaxyears beginningin2011.However,PresidentObamasignedlegislationinlate2010thattemporarily extendedtheBushtaxcutsthrough2012. ManycommentatorsagreethatCongressisunlikelytoextendtheBushtaxcutspriortotheNovember elections,butuncertaintyremainsastowhetherCongresswilltakeactionfollowingtheelections. ProvidedCongressfailstoextendtheBushtaxcuts,manysignificantratechangesandother substantivechangeswilltakeeffectin2013.Thisarticlesummarizesthemajorfederalincometax changesthatarescheduledtakeeffectin2013ifCongressallowstheBushtaxcutstoexpire,certain otherchangesscheduledtotakeeffectindependentoftheBushtaxcuts,andplanningstrategiesto reducetheimpactofthesechanges. Listedbelowareareaswebelievetobeofmostinteresttomanyofourclients: #1.IndividualIncomeTaxRates IfCongressallowstheBushtaxcutstoexpire,ordinaryincometaxrateswillincreaseformost individualtaxpayersbeginningin2013.Asdiscussedbelow,qualifieddividendincomethatiscurrently taxedatlongtermcapitalgainrateswillbetaxedatthehigherordinaryincomerates.Thefollowing tablesetsforththescheduledrateincreases,using2012dollaramountswhichwillbeadjustedfor inflationin2013. TaxBrackets(2012DollarAmounts) MarginalRate UnmarriedFilers($) MarriedJointFilers($) Over ButNotOver Over ButNotOver 2012 2013 0 8,700 0 17,400 10% 15% 8,700 35,350 17,400 70,700* 15% 15% 35,350 85,650 70,700* 142,700 25% 28% 85,650 178,650 142,700 217,450 28% 31% 178,650 388,350 217,450 388,350 33% 36% 388,350 388,350 35% 39.6%
* In 2013, this dollar amount will decrease to 167% of the amount for unmarried taxpayers in the same bracket(whichis$58,900in2012),ratherthan200%oftheamountforunmarriedtaxpayersundercurrent law. This change will have the effect of putting more middleincome joint filers in the 28% bracket and increasingthe"marriagepenalty"formanytaxpayers.

#2.LongTermCapitalGainRates Themaximumrateonlongtermcapitalgainisscheduledtoincreasefrom15to20percentin2013. Individualtaxpayersinthe10and15percentordinaryincometaxbracketscurrentlypaynotaxon longtermcapitalgain.Thesetaxpayersarescheduledtobesubjecttoa10percentlongtermcapital gainratein2013.An18percentmaximumLongTermCapitalGainratewillapplytocapitalassets purchasedafter2000andheldformorethanfiveyears.Additionally,the3.8percentMedicare contributiontaxdiscussedbelowwillincreasetheeffectiverateoftaxonlongtermcapitalgainfor certainhigherincometaxpayerstoashighas23.8percent.Thefollowingtablesetsforththe scheduledrateincreases. 2013(includingMedicare MaximumRates 2012 2013 contributiontax) LongTermCapitalGain 15% 20% 23.8% Qualified5YearCapitalGain 15% 18% 21.8% PlanningStrategies:IfCongressfailstotakeactionastheyearendapproaches,investorswhowere otherwiseconsideringsellingappreciatedstocksorsecuritiesinearly2013shouldgiveadditional considerationtosellingin2012totakeadvantageofthelowerrate,assumingtheywillhaveheldthe assetforlongerthanoneyear.Additionally,businessownerswhoareconsideringsellingtheirbusiness inthenearfutureshouldconsultwiththeirtaxadvisertodiscusswhetherelectingoutofthe installmentmethodforaninstallmentsalein2012wouldbemoreadvantageousfromataxplanning perspective.ElectingoutofInstallmentsalewilltax100%ofthegaininyear2012withalltaxes payablebyApril15,2013whichmayoccurpriorto100%ofthecashproceedsbeingcollected. #3.DividendIncomeRates TheBushtaxcutscreatedtheconceptof"qualifieddividendincome"whichcurrentlyallowsdividends receivedfromdomesticcorporationsandcertainforeigncorporationstobetaxedatthetaxpayer's longtermcapitalgainrate.Additionally,qualifieddividendincomeearnedbymutualfundsand exchangetradedfundsmaybedistributedtoshareholdersandtreatedasqualifieddividendincomeby theshareholder.PriortotheBushtaxcuts,alldividendincomewastaxedasordinaryincome.If Congressfailstoextendtheseprovisions,thequalifieddividendincomeprovisionswillexpire,andall dividendswillonceagainbetaxedasordinaryincome.Mostnotably,taxpayersinthehighestmarginal incometaxbracketwhocurrentlyenjoythe15percentrateonqualifieddividendincomewillbetaxed at39.6percentfordividendsreceivedfromthesameissuerin2013.Additionally,the3.8percent Medicarecontributiontaxdiscussedbelowwillincreasetheeffectiverateoftaxondividendincome forcertainhigherincometaxpayerstoashighas43.4percent.Thefollowingtablesetsforththe scheduledrateincreases.

MaximumRates QualifiedDividendIncome OrdinaryDividendIncome

2012 15% 35%

2013 39.6% 39.6%

2013(includingMedicare contributiontax) 43.4% 43.4%

PlanningStrategies:Becauseoftheimpendingincreasetotaxratesapplicabletodividends,ownersof closelyheld(Ctype)corporationsshouldconsiderdeclaringandpayingalargerthannormaldividend thisyearifthecorporationhassufficientearningsandprofits.Ownersshouldcarefullyplananysuch distributionsasdistributionsinexcessofthecorporation'searningsandprofitswillreducethe shareholder'sstockbasisandsubjecttheshareholdertoincreasedlongtermcapitalgaintaxableat potentiallyhigherrateswhentheshareholdersubsequentlydisposesofthestock.Ownersofclosely heldcorporationsshouldconsulttheirtaxadvisertodiscussdividendplanningandotherstrategiessuch asleveragedrecapitalizationstotakeadvantageofthelowratecurrentlyapplicabletoqualified dividendincome;Scorporationsthatmakecashdistributionsinexcessofshareholdersbasisare treatedaslongtermcapitalgains.ThegainisreportedontheshareholdersindividualScheduleD.

#4.NewMedicareContributionTax Anew3.8percentMedicarecontributiontaxoncertainunearnedincomeofindividuals,trusts,and estatesisscheduledtotakeeffectin2013.Thisprovision,whichwasenactedaspartofthePatient ProtectionandAffordableCareAct(PPACA)orsometimesreferredtoasOBAMACARE,isscheduledto takeeffectregardlessofwhetherCongressextendstheBushtaxcuts.Forindividuals,the3.8percent taxwillbeimposedonthelesseroftheindividual'snetinvestmentincomeortheamountbywhichthe individual'smodifiedadjustedgrossincome(AGI)exceedscertainthresholds($250,000formarried individualsfilingjointlyor$200,000forunmarriedindividuals).Forpurposesofthistax,investment incomeincludesinterest,dividends,incomefromtradesorbusinessesthatarepassiveactivitiesorthat tradeinfinancialinstrumentsandcommodities,andnetgainsfromthedispositionofpropertyheldin atradeorbusinessthatisapassiveactivityorthattradesinfinancialinstrumentsandcommodities. Investmentincomeexcludesdistributionsfromqualifiedretirementplansandexcludesanyitemsthat aretakenintoaccountforselfemploymenttaxpurposes. PlanningStrategies:UntiltheDepartmentofTreasuryissuesclarifyingregulations,uncertaintyremains regardingwhichtypesofinvestmentincomewillbesubjecttothisnewtax.Taxpayerswhosemodified AGIexceedsthethresholdsdescribedaboveshouldconsulttheirtaxadvisertoplanfortheimposition ofthistax.Specifically,businessownersshoulddiscusswiththeirtaxadviserwhetheritwouldbemore advantageoustobecome"active"intheirbusinessratherthan"passive"forpurposesofthistax. OwnersofcertainbusinessentitiessuchaspartnershipsandLLCsshouldalsoconsiderwhethera potentialchangeto"active"statusinthebusinesscouldtriggerselfemploymenttaxliability.Investors inpassthroughentitiessuchaspartnerships,LLCs,andScorporationsshouldalsoreviewthetax distributionlanguageintherelevantentityagreementtoensurethatfuturetaxdistributionswill accountforthisnewtax. Additionally,individualswillhaveagreaterincentivetomaximizetheirretirementplancontributions sincedistributionsfromqualifiedretirementplansarenotincludedininvestmentincomeforpurposes ofthetax.WhiledistributionsfromtraditionalIRAsand401(k)plansarenotincludedininvestment incomeforpurposesofthetax,theydoincreaseanindividual'smodifiedAGIandmaypushthe individualabovethemodifiedAGIthreshold,thussubjectingtheindividual'sotherinvestmentincome tothetax.IndividualsmayalsoconsiderconvertingtheirtraditionalretirementplanintoaRothIRAor Roth401(k)thisyearsinceRothdistributionsarenotincludedininvestmentincomeanddonot increasetheindividual'smodifiedAGI.AlthoughtheRothconversionwouldbetaxableatordinary rates,individualsshouldconsiderconvertingthisyear,in2012,toavoidthehigherordinaryrates scheduledtotakeeffectin2013. #5.ReductioninItemizedDeductions Undercurrentlaw,itemizeddeductionsarenotsubjecttoanyoveralllimitation.IftheBushtaxcuts expire,anoveralllimitationonitemizeddeductionsforhigherincometaxpayerswillonceagainapply. Mostitemizeddeductions,exceptdeductionsformedicalanddentalexpenses,investmentinterest, andcasualtyandtheftlosses,willbereducedbythelesserof3percentofAGIaboveaninflation adjustedthresholdor80percentoftheamountofitemizeddeductionsotherwiseallowable.The inflationadjustedthresholdisprojectedtobeapproximately$174,450in2013foralltaxpayersexcept thosemarriedfilingseparately.Doingataxprojectionforyear2012beforeDecember31,2012isthe bestwaytodetermineifacceleratingthepaymentofyear2013intoyear2012providessignificant taxsavings. PlanningStrategies:Becausetheoveralllimitationonitemizeddeductionswillautomaticallyapplyto higherincometaxpayers,planningstrategiesarelimitedandhighlyindividualized.Acceleratingcertain itemizeddeductionsin2012toavoidthelimitationmaytriggeralternativeminimumtax(AMT)liability in2012.Taxpayersshouldconsultwiththeirtaxadvisertodiscusstheimpactofthislimitationand whetheritmaybeadvantageoustoacceleratecertaindeductions,ifpossible,to2012.

#6.ReductioninElectiontoExpenseCertainDepreciableBusinessAssets Taxpayersmaycurrentlyelecttoexpensecertaindepreciablebusinessassets(Section179assets)in theyeartheassetsareplacedintoserviceratherthancapitalizeanddepreciatethecostovertime. Section179assetsincludemachinery,equipment,othertangiblepersonalproperty,andcomputer software.Computersoftwarefallsoutofthisdefinitionin2013.Themaximumallowableexpense cannotexceedaspecifiedamount,whichisreduceddollarfordollarbytheamountofSection179 assetsplacedintoserviceexceedinganinvestmentceiling.Boththemaximumallowableexpenseand theinvestmentceilingwilldecreasenextyear,asshowninthetablebelow.

MaximumAllowableExpense InvestmentCeiling

2012($) 139,000 560,000

2013($) 25,000 200,000

PlanningStrategies:ThechangeinlawwillbothsignificantlydecreasethedollaramountofSection 179assetsthatmaybeexpensedandcausethephaseouttobetriggeredatalowerthreshold. Accordingly,businessownersshouldconsiderplacingSection179assetsintoservicein2012totake advantageoftheimmediatetaxbenefit.Additionally,purchasesofqualifyingcomputersoftware shouldbeacceleratedto2012,ifpossible,assuchpurchaseswillnolongerqualifyforexpensingin 2013.

#7.OtherChangesAffectingIndividuals Additionalemployeeportionofpayrolltax.Theemployeeportionofthehospitalinsurance payrolltaxwillincreaseby0.9percent(from1.45percentto2.35percent)onwagesover $250,000formarriedtaxpayersfilingjointlyand$200,000forothertaxpayers.The employerportionofthistaxremains1.45percentforallwages.Thisprovision,whichwas enactedaspartofthePPACA,isscheduledtotakeeffectin2013regardlessofwhether CongressextendstheBushtaxcuts. Phaseoutofpersonalexemptions.Ahigherincometaxpayer'spersonalexemptions (currently$3,800perexemption)willbephasedoutwhenAGIexceedsaninflationindexed threshold.Theinflationadjustedthresholdisprojectedtobe$261,650formarried taxpayersfilingjointlyand$174,450forunmarriedtaxpayers. MedicalandDentalExpenseDeduction.AspartofthePPACA,thethresholdforclaiming theitemizedmedicalanddentalexpensedeductionisscheduledtoincreasefrom7.5to10 percentofAGI.The7.5percentthresholdwillcontinuetoapplythrough2016fortaxpayers (orspouses)whoare65andolder. Decreaseinstandarddeductionformarriedtaxpayersfilingjointly.Thestandard deductionformarriedtaxpayersfilingjointlywilldecreaseto167%(ratherthanthecurrent 200%)ofthestandarddeductionforunmarriedtaxpayers(currently$5,950).In2012 dollars,thiswouldlowerthestandarddeductionforjointfilersfrom$11,900to$9,900. Abovethelinestudentloaninterestdeduction.Thisdeductionwillapplyonlytointerest paidduringthefirst60monthsinwhichinterestpaymentsarerequired,whereasnosuch timelimitationappliesundercurrentlaw.Thedeductionwillphaseoutoverlowermodified AGIamounts,whichareprojectedtobe$75,000forjointreturnsand$50,000forallother returns. Incomeexclusionforemployerprovidededucationalassistance.Thisexclusion,which allowsemployeestoexcludefromincomeupto$5,250ofemployerprovidededucational assistance,isscheduledtoexpire. Homesaleexclusion.Heirs,estates,andqualifiedrevocabletrusts(truststhatweretreated asownedbythedecedentimmediatelypriortodeath)willnolongerbeabletotake advantageofthe$250,000exclusionofgainfromthesaleofthedecedent'sprincipal residence.

Creditforhouseholdanddependentcareexpenses.Maximumcreditableexpenseswill decreasefrom$3,000to$2,400(foronequalifyingindividual)andfrom$6,000to$4,800 (fortwoormoreindividuals).Themaximumcreditwilldecreasefrom35percentto30 percentofcreditableexpenses.TheAGIbasedreductioninthecreditwillbeginat$10,000 ratherthan$15,000. Childcredit.Themaximumcreditwilldecreasefrom$1,000to$500perchildandcannotbe usedtooffsetAMTliability. EarnedIncomeTaxCredit.Thephaseoutrangesforclaimingthecredit,whichvary dependingonthenumberofqualifyingchildren,arescheduledtodecreaseforjoint returns.Further,thecreditwillbereducedbythetaxpayer'sAMTliability.

* ThisnoticeisrequiredbyIRSCircular230,whichregulateswrittencommunicationsaboutfederal taxmattersbetweentaxadvisorsandtheirclients.Totheextenttheprecedingcorrespondence and/oranyattachmentisawrittentaxadvicecommunication,itisnotafull"coveredopinion." Accordingly,thisadviceisnotintendedandcannotbeusedforthepurposeofavoidingpenalties thatmaybeimposedbytheIRS. * Thismessage(includinganyattachments)maycontainconfidentialclientinformation.The informationisintendedonlyfortheuseoftheindividualtowhomorentitytowhichitis addressed.Ifyouarenottheaddresseeortheemployeeoragentresponsibletodeliverthisemail toitsintendedrecipient,youareherebynotifiedthatanyreview,use,dissemination,distribution, disclosure,copying,ortakingofanyactioninrelianceonthecontentsofthisinformationisstrictly prohibited. * Thisisprovidedforinformationalpurposes.Pleaseseektheopinionofyourtaxadvisorregarding yourpersonaltaxadvice/servicessituation. TheabovematerialwaspreparedbyPeakAdvisorAlliance.
LPLComplianceNumber:1079535 Phone:8473795800 nuFinancialGroup www.anufinancialgroup.com SecuritiesofferedthroughLPLFinancial,memberFINRA/SIPC