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The 2012 Fiscal Cliff
The document discusses how many tax provisions are set to expire or change at the end of 2012, which would result in individuals and families paying substantially more in taxes. It outlines how popular tax deductions, credits, and rates that applied to income, capital gains, dividends, payroll taxes, and estate taxes are scheduled to expire or change. The expiration of these tax provisions could remove up to $3,500 from the average taxpayer's annual income and significantly increase taxes for many individuals, families, and businesses.
The 2012 Fiscal Cliff
- 1. Tax Law Changes and the Fiscal Cliff Wray Rives CPA CGMA Rives CPA PLLC
- 2. Big Picture ifNothing 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 lasted Sec 179 Limit Phase Out 2011 $500,000 $2,000,000 2012 $139,000 $560,000 2013 $25,000 $200,000 Bonus Depreciation Percentage 2011 100% 2012 50% 2013 0%
- 4. Tax Rates It was fun while it lasted Income Tax Lowest Highest 2011-2012 10% 35% 2013 15% 39.6% Capital Gains Tax Lowest Highest 2011-2012 0% 15% 2013 10% 23.8% Qualified Lowest Highest Dividends 2011-2012 0% 15% 2013 15% 39.6%
- 5. Tax Rates It was fun while it lasted Payroll Tax Self-Employed FICA Limit 2012 13.3% $106,800 2013 15.3% $110,100 AMT Rate Exemption 2012 26% Up to $175K $74,450 28% Above 2013 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 lasted Self-Employed Health Not deductible from SE Income in 2013 Insurance Child Tax Credit Drops from $1,000 to $500 in 2013 15 year Depreciation on Back to 39.5 Years Restaurant and Retail Improvements R&D Credit, Work Opportunity Credit, Gone in 2013 Energy Efficiency Credits, Deduction for State and Local Sales Tax, Qualified Small Business Gain Exclusion Tuition and Education Deductions, Rollover Gone in 2013 from FSA to HSA, Mortgage Insurance Premium Deduction, Educator Expense Deduction, Charitable Deduction for IRA Distributions
- 8. New Up andComing Taxes Healthcare Tax Rate Exemption 2013 0.9% Income over $200,000 or $250,00 if married 2013 3.8% All Investment Income (Including S-Corp Distributions)
- 9. New Up andComing Changes Medical Expense 2012 > 7.5% of AGI 2013 > 10% of AGI Deduction FSA Cap 2012-Up to Employer 2013-$2,500 Healthcare mandate 2014 $285 or 1% of income 2015 $975 or 2% 2016 $2,085 or 2.5%
- 10. Estate Tax Rate Exemption 2011-2012 35% $5,000,000 2013 55% $1,000,000
- 11. Tax Revenue fromExpiring Provisions Tax Provision Revenue in Millions Extend Tax Rates for everyone $94,006 Extend Tax Rates for those $62,872 below $200,000/$250,000
- 12. Tax Provision Revenue in Millions AMT $132,240 Deduction for teacher expense $462 Residence Debt Exclusion $1,3227 Sales Tax Deduction $4,359 R&D Credit $14,324 15 Year Depreciation on $3,717 restaurant and retail improv. Sec 179 Expense $2,352 American Opportunity Credit $13,123 Limit on Itemized Deductions $10,892 Child Tax Credit $35,632 Reduced Cap Gain Tax Rate $10,123 Cap Gain rate on Dividends $15,731 Exemption for active Financing $11,225
- 13. Rives CPA PLLC RivesCPA.co