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Tax Tips December 4, 2012

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Categories:
Tax, CPAMedical Expenses

Summary:

Our Tax Tips page gives you a brief overview of the key tax changes that may affect your tax planning and financial strategies. Please call our office for details of how the new changes may affect your specific situation.

Article Body:

Fiscal Cliff ...what is this?
The “fiscal cliff” is a series of automatic tax increases and spending cuts that are the result of a Congressional compromise reached last summer and starting January 2013.

Partly because of this, U.S. Economic forecasts are expecting a very weak 4 th quarter with as little as 1.1% annual rate of growth. As a CPA, I expect tax law changes. But this is an extraordinary year! There is a swirl of unresolved tax issues that will impact almost everyone.

Don’t do anything without knowing the tax impact on your investment portfolio and family finances…come in for a year-end check-up.

The IRS and the Affordable Care Act (ACA)

Starting in 2013 – an extra .9% Medicare tax will be charged on:

Salary or SE income above $200,000
Combined salary or SE income about $250,000 for a married couple
Salary or SE income above $125,000 for those filing married separately

The IRS has issued proposed regulations concerning this tax to assist employers in making adjustments. Employees are also guided in increasing withholding amounts if it is anticipated that a joint income would exceed the threshold.

Higher threshold for medical deductions – Currently you can claim an itemized deduction for medical expenses to the extent the expenses exceed 7.5% of AGI. Starting in 2013, the hurdle is raised to 10% of AGI.

Flexible Spending Account -The 24 million American who have flexible spending accounts will face a new federally imposed $2,500 annual cap for 2013. These pretax accounts, which are currently at $5,000, are used to purchase everything from contact lenses to braces.

New 3.8% Medicare tax on investment income – Starting in 2013, all or part of net investment income (long term capital gains, interest, dividends, annuities, rents, income from passive activities and income from trading in financial instruments) collected by higher-income individuals ($200,000) can get socked with an additional 3.8% tax (“Medicare Contribution Tax”). Tax rates for capital gains & dividends – is currently at 15% and will go to 20% starting in 2013. Therefore the maximum federal rate on long-term gains for 2013 and beyond will actually be 23.8% (versus the current 15%) and the maximum rate on dividends will be a whopping 43.4% (versus the current 15%)./p>

Tax planning is more important now so call and make an appointment!

Copyright © 2012 Desert Foothills Accounting & Tax Services, PC

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