The 2012 Fiscal Cliff
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  • 1. Tax Law Changes and the Fiscal CliffWray Rives CPA CGMA Rives CPA PLLC
  • 2. Big Picture if Nothing Changes• Average taxpayer will pay $3,500 more in income and payroll tax• Average after tax income would drop 6.2%• Mandatory spending cuts will compel federal agencies to cut 2.14 million jobs• Significant cloud of uncertainty which the markets and businesses hate• More of a steep hill than a cliff
  • 3. Accelerated Depreciation It was fun while it lastedSec 179 Limit Phase Out2011 $500,000 $2,000,0002012 $139,000 $560,0002013 $25,000 $200,000Bonus Depreciation Percentage2011 100%2012 50%2013 0%
  • 4. Tax Rates It was fun while it lastedIncome Tax Lowest Highest2011-2012 10% 35%2013 15% 39.6%Capital Gains Tax Lowest Highest2011-2012 0% 15%2013 10% 23.8%Qualified Lowest HighestDividends2011-2012 0% 15%2013 15% 39.6%
  • 5. Tax Rates It was fun while it lastedPayroll Tax Self-Employed FICA Limit2012 13.3% $106,8002013 15.3% $110,100AMT Rate Exemption2012 26% Up to $175K $74,450 28% Above2013 Same rates $45,000 4M taxpayers paid AMT in 2011 Est. 31M would pay in 2013
  • 6. Credits and Deductions It was fun while it lastedSelf-Employed Health Not deductible from SE Income in 2013InsuranceChild Tax Credit Drops from $1,000 to $500 in 201315 year Depreciation on Back to 39.5 YearsRestaurant and RetailImprovementsR&D Credit, Work Opportunity Credit, Gone in 2013Energy Efficiency Credits, Deduction forState and Local Sales Tax, Qualified SmallBusiness Gain ExclusionTuition and Education Deductions, Rollover Gone in 2013from FSA to HSA, Mortgage InsurancePremium Deduction, Educator ExpenseDeduction, Charitable Deduction for IRADistributions
  • 7. New Up and Coming TaxesHealthcare Tax Rate Exemption2013 0.9% Income over $200,000 or $250,00 if married2013 3.8% All Investment Income (Including S-Corp Distributions)
  • 8. New Up and Coming ChangesMedical Expense 2012 > 7.5% of AGI 2013 > 10% of AGIDeductionFSA Cap 2012-Up to Employer 2013-$2,500Healthcare mandate 2014 $285 or 1% of income 2015 $975 or 2% 2016 $2,085 or 2.5%
  • 9. Estate Tax Rate Exemption2011-2012 35% $5,000,0002013 55% $1,000,000
  • 10. Tax Revenue from Expiring ProvisionsTax Provision Revenue in MillionsExtend Tax Rates for everyone $94,006Extend Tax Rates for those $62,872below $200,000/$250,000
  • 11. Tax Provision Revenue in MillionsAMT $132,240Deduction for teacher expense $462Residence Debt Exclusion $1,3227Sales Tax Deduction $4,359R&D Credit $14,32415 Year Depreciation on $3,717restaurant and retail improv.Sec 179 Expense $2,352American Opportunity Credit $13,123Limit on Itemized Deductions $10,892Child Tax Credit $35,632Reduced Cap Gain Tax Rate $10,123Cap Gain rate on Dividends $15,731Exemption for active Financing $11,225
  • 12. Rives CPA PLLC RivesCPA.co