The combined effect of the new Medicare taxes contained in the health care reform law with the expiration of the “Bush Tax Cuts” has created what some pundits are calling “Taxmageddon.” Here is a summary of these potential tax increases, how they will affect you, and some ideas of how to mitigate the impact.

1. Prepare for
New Medicare Taxes
and Other Potential Tax Increases
The combined effect of the new Medicare taxes contained
in the health care reform law with the expiration of the
“Bush Tax Cuts” has created what some pundits are calling
“Taxmageddon.” Here is a summary of these potential tax
increases, how they will affect you, and some ideas of how
to mitigate the impact.
SUMMARY OF NEW MEDICARE TAXES OTHER LOOMING TAX INCREASES
Without Congressional action, all of the “Bush tax cuts”
ADDITIONAL 0.9% MEDICARE TAX ON WAGES (along with some other provisions) will expire at the end of
AND SELF-EMPLOYMENT (SE) INCOME 2012. Should these provisions be allowed to expire:
Applies to wages and net SE income in excess of: n arginal tax rates will increase, including the top marginal
M
rate from 35% to 39.6%
n 250,000 for married couples filing jointly
$ n he long-term capital gains rate will increase from
T
n 200,000 for single taxpayers
$ 15% to 20%
n he dividends tax rate will increase from 15% to
T
the marginal tax rate (as high as 39.6%)
3.8% MEDICARE TAX ON UNEARNED INCOME n he limitation on itemized deductions and phase-out
T
of personal exemptions will return
Applies to individuals, trusts and estates n he marriage penalty will increase
T
n he FICA tax rate on wages will increase from 4.2% to 6.2%
T
Tax equal to 3.8% of the lesser of:
WHAT CAN I DO TO MITIGATE THESE TAX
n et investment income, or
N INCREASES?
n he excess of Modified AGI over $250,000 for
T
Depending on your particular situation, several planning
married couples filing jointly ($200,000 for single
strategies may be available, including:
taxpayers)
n ccelerating income into 2012, such as retirement plan
A
NET INVESTMENT INCOME distributions, built-in capital gains or installment sale income
n elaying deductions to a later year
D
Includes: Excludes: n onverting to a Roth IRA in 2012
C
n hifting investments to growth securities that don’t produce
S
n Interest, dividends, n Qualified retirement current income
rents plan distributions n hifting investments to children
S
n Passive trade or n Active trade or n Using installment sales after 2012 to defer income
business income business income
n apital gains
C n Tax exempt income
HOW DO I DETERMINE WHICH STRATEGIES ARE
BEST FOR MY SITUATION?
To assess the impact of these impending tax increases on
your financial situation and to develop strategies to mitigate
that impact, contact your local CBIZ MHM tax specialist. For
more information or to locate your local CBIZ office, visit us
CBIZ MHM, LLC online at www.cbiz.com.