tax law update: its impact & planning for 2012 and the future the guru tax & financial...
TRANSCRIPT
TAX LAW UPDATE:ITS IMPACT & PLANNING FOR
2012 AND THE FUTURE
The Guru Tax & Financial Services, Inc.Satya B. MitraPh.D., E.A., CFP®
508-797-0005
U. S. INCOME TAX HISTORY In 1913 tax revenue was 3% of GDP Currently it is 15-20% of GDP Noteworthy changes from FDR to
Reagan to Clinton to George W. Bush
CURRENT MAJOR FACTORS TO IMPACT TAX LAWS High U.S. debt: $16T Huge budget deficit, 2011: $1.3T Stubborn unemployment Cost of social security / health care 78 million retiring baby boomers Growing political discontent &
disagreement Presidential election result
CAPITAL GAINS RATES
Long-term capital gains rates are scheduled to increase from 0 to 10% for the 10 and 15% brackets.
DIVIDEND RATES
Dividend rates could increase from 15% to 36% or 39.6% depending on a taxpayer’s marginal tax rate
MEDICARE EXCISE TAX
EXTRA 3.8% TAX LIABILITY ON UNEARNED INCOME FOR AGI OVER $200,000 (SINGLE) AND $250,000 (MFJ) Capital gain Dividends Interest Royalty Net rental incomeLong-Term Capital Gain Every $10,000
Capital Gain Tax at 20% $2,000
Medicare Excise Tax at 3.8%
$380
Total Tax Due: $2,380
ESTATE PLANNING AND HIGHEST ESTATE TAX RATES Jump from 35% to 55% in 2013 Exemption amount in 2012 is
$5.12M Expected to go down to $1M in 2013
DEDUCTIONS EXPIRED FOR YEAR 2012 Mortgage insurance premium Classroom expenses ($250) for
teachers General sales tax vs. State income
tax deduction Non business energy efficiency
credit
OTHER SIGNIFICANT TAX LAWS EXPIRING AFTER YEAR 2012 Social security 2% tax cut $1,000 child tax credit 7.5% medical expense deduction Full use of deductions and exemptions $2,500 American opportunity tax
credit Enhanced depreciation Exemption from mortgage debt
forgiveness
DECLARTION OF FOREIGN BANK ACCOUNT AND FOREIGN ASSETS Offshore Voluntary Disclosure
Program (OVDP) Possible serious penalties and tax
liability
ELECTION IMPACT
President Obama Renew the cuts for those making
under $250,000 Have wealthy pay their fair share
Mitt Romney Maintain lower income tax rates Make Bush tax cuts permanent for
savings and investments
PLANNING STRATEGY (PART 1)• Income acceleration & income deferral• Deductions acceleration & deductions
deferral• Keep AMT in equation before
exercising stock options• Sell assets with gain in 2012• Consider yearly dividend earnings
from investments• High net worth tax payers consider
$5M lifetime gifting to reduce estate tax
PLANNING STRATEGY (PART 2) Business owners plan on setting up
right retirement plan, hiring veterans, purchasing vehicles over 6,000 pounds
Hire your children under 18 in your business
Invest in municipal bonds, growth oriented mutual funds, annuity, life insurance
Consider Roth IRA conversion Contribute appreciated stocks to charity
AUDITS
IRS, DET and state audits have significantly increased
Keep good records Proofs of all deductions for at least
3 years
FUTURE OF TAX LAW, THE ELECTION, LEGISLATION BY CONGRESS AFTER ELECTION, THE EXTENSION OR REPEAL OF BUSH TAX LAWS…
ALL ABSOLUTELY UNCERTAIN.
STAY TUNED.