What the 2013 Tax ChangesMean for Business Owners Presentation by Schwartz Heslin Group, Inc. (SHG)
The Bush Tax CutsThe Bush-era tax cuts are due to expire at the end of2012 – barring any intervening legislation in the interim.But the impasse between Congressional Republicansand Democrats over the extension of all of the tax cutswill almost certainly result in… …The Expiration of the Bush Tax Cuts
Summary of the Changes (1)Income Type 2012 2013 Percent IncreaseOrdinary Income 35% 39.6% 13.1%Capital Gains 15% 20% 33.3%Qualified Dividends 15% 39.6% 164%*New Medicare Tax on 0% 3.8% NAUnearned IncomeNotes:*The added Medicare Tax on Unearned Income is not a component of the Bush-eratax cuts.**Tax rates are all maximum posted rate.
Effective Capital Gains TaxWith the capital gains tax rate rising to 20% andthe introduction of a 3.8% Medicare tax onunearned income, The effective maximum tax rate on the sale of a business will rise to 23.8%
Key PointThe increase in the maximum capital gainstax rate will reverse nearly 2 decades ofdeclining capital gains taxes And reduce the after-tax sale value of a business
Additional Liability Based on the projected 2013 tax rates: The after-tax value of the sale of a business worth $25M: only $19.05M The after-tax value of a $5M gift: only $2.25MNote: Calculations assume zero base.
After Tax Deal Value: 2012 vs 2013 90 85Sales Value After Tax (Millions 80 76.2 70 60 50 USD) 42.5 40 38.1 30 21.25 19.05 20 10 0 25 50 100 Pre-Tax Deal Value (Million USD)Note: Calculations assume zero base.
Conclusion…If a sale is consistent with your personal long-term financial goals, The selling environment isdecidedly more favorable inadvance of these changes
Conclusion…First step: Have a professional assess the value ofyour enterprise See for yourself just how large a difference selling in 2012 couldmake
Conclusion…Keep in mind, after January 1, 2013, the selling environmentis unlikely to improvefor the foreseeablefuture.
Presented by: Schwartz Heslin GroupAddress: Or visit us on: 8 Airport Park Bvld. Latham, NY 12110Phone: 518-586-7733 Web: www.shggroup.com