It’s December 27th and the discussions between Congress and the President seem no closer to an agreement than back in the early days of 2012. I’ve been trying to hold off on this article due to the possibility of a last-minute deal arriving. But I believe it’s best to inform the public of what lays ahead.

<Update: Jan 2, a new tax deal has been reached – Read about it here  >

1. Income Tax Rates Are Going Up

    • The tax rates for the top four income brackets will all rise: from 25 to 28 percent, 28 to 31 percent, 33 to 36 percent, and 35 to 39.6 percent.
      Current Tax Rate
      Married, Filing jointly
      Change on 1/1/2013
      10% Bracket
      Eliminated, lowest tax rate will be at 15%
      15% Bracket
      15% bracket applies from $0-$60,550 (married), from $0-$36,250  (single)
      +3% , increasing to 28%
      from $60,550 -$146,400 (married), from $36,250-$87,850 (single)
      +3%, increasing to 31%
      +3%, increasing to 36%
      Over $398,350
      Over $398,350
      +4.6%, increasing to 39.6%

2. Increase In Payroll Tax Due To New Healthcare Legislation

    • Beginning January there would be an increase in payroll taxes for those making AGI of $200,000 (single) and $250,000 (married)
    • AGI over thresholds taxed at additional 2.35

3. Possible Expiration Of Bush Tax Cuts

Well, we all know negotiations are still on the way. But as of this moment, here are some of the expected changes and potential impact.

  • Increase in Capital Gains Tax from 15% to 20%
  • In addition, an additional surtax of 3.8% on investment income for those making AGI of $200,000 (single) and $250,000 (married), due to the new Healthcare Legislation, will bring the potential capital gains tax to 23.8% (20% + 3.8%)
  • The qualified dividends rate can change from 15% to your ordinary income tax rates.
  • Child tax credit goes from $1,000 to $500 per child.
  • Sec 179 business expense limits go from $139,000 to $25,000

There are many more tax cuts that will be affected, but these are but a few that we at Infin8 Enterprises get asked about frequently. Contact us to see how our knowledgeable CPAs  can help you plan for these changes accordingly.


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