READY FOR THE FALLOUT FROM THE FISCAL CLIFF TAX DEAL?? BILL WALSTON
taxpayers filing separately. The law limits the
Owning your own business,
like we real estate investors do,
is still the best tax shelter around.
phase-out to 80% of deductions, but almost
nobody hits that limit, because deductions tend to
increase with income. Think state and local taxes
and charitable donations, which are much more
than 3% of income for almost everyone with
higher income. In my opinion, the phase-out is
Limitations on Personal Exemptions and
really a sneaky way to raise marginal income tax
Itemized Deductions
rates.
Starting in 2013, the Act reinstated the personal
exemption
phase-out.
The
total
amount
Capital Gains and Dividend rates
of
exemptions that can be claimed by taxpayer will be
The top rate for capital gains and dividends will
reduced by 2% for each $2500 by which the
permanently move to 20% (up from 15%) for all
taxpayer’s adjusted gross income exceeds an
taxpayers in the 39.6% tax bracket. The rate will
applicable threshold. The threshold amount is
remain
$250,000 for individuals; $300,000 for married filing
Taxpayers who fall into the lowest marginal tax
jointly; $275,000 for heads of households; and
rates of 10 to 25% will not pay capital gains tax.
at
15% for most
other
taxpayers.
$150,000 for married taxpayers filing separately.
These amounts will be indexed for inflation for tax
Just a note: what the Act does not mention is the
years after 2013.
3.8% tax on net investment income which could
bring the rate on high income individuals to 23.8%
The “Pease provision” is back and imposes a phase
out on the itemized deductions of high income
earners.
that
This means
itemized
deduc-
tions are reduced by
3% of the amount by
which
taxpayer’s
a
adjusted gross income
exceeds
a
threshold
amount.
The starting
thresholds are $300,000
for joint filers, $250,000
for
single
filers
and
$150,000 for married