The 2010 Tax Relief Act extends through December 31, 2012 and the extended “Bush” tax rate cut revert to previous levels in 2013. President Obama recently proposed additional tax changes for 2013.
The 2010 Tax Relief Act also maintained “the reduced maximum capital gains rate of 15% on adjusted net capital gain on noncorporate taxpayers (for regular tax and AMT purposes) and 0% capital gains rate on adjusted net capital gain of noncorporate taxpayers in the 10% or 15% income tax bracket.” The favorable taxation of qualified dividends received by individuals, trusts or estates at capital gain rates was also extended through 2012.
Without any further legislation, the individual income tax rates will revert to 15, 25, 28, 36 and 39.6 percent. The capital gains will increase to 20% and dividends will be taxed at normal income rates. Also, beginning in 2013, there will be a 3.8% Medicare contribution tax on net investment income in excess of $200,000 ($250,000 for joint filers and $125,000 for married filing separately) will apply. An additional Medicare tax of 0.9% on earned income in excess of $200,000 ($250,000 for joint filers and $125,000 for married filing separately) will apply.
Recently, President Obama PROPOSED a $3 trillion federal budget deficit reduction plan which is to be reviewed by Congress. The proposed plan includes $1.57 trillion in new tax revenue…Too many to mention.
Individuals should start planning for the 2013 changes and consult with their real estate professionals, tax attorneys and CPA’s for sound investment strategies.