Mitt Romney is currently the leading Republican candidate for President. We have laid out below Mr. Romney’s current plans for the tax system if he were elected President. At the individual level, exemption of investment income (long-term capital gains, dividends, and interest income) for most taxpayers with income less than threshold amounts ($200,000 for married couples, $100,000 for single returns and $150,000 for heads of households). We assume that all other income is counted first in determining whether investment income is subject to tax. Therefore, for any married couple with income from other sources above $200,000, all capital gains, dividends, and interest would continue to be subject to current tax rules. For taxpayers … [Read more...]
Obama Outlines Tax Proposal in “Blueprint for America”
President Obama unveiled his tax proposals during his recent State of the Union address recently. The package, according to the White House, is revenue-neutral. For individuals, President Obama has proposed the following: Extending the employee-side payroll tax cut for all of 2012; Enacting a so-called "Buffett Rule;" and Making permanent the American Opportunity Tax Credit (AOTC). The Buffett Rule would ensure that taxpayers making over $1 million annually would pay an effective tax rate of at least 30 percent. President Obama’s business tax proposals are a mix of old and new ideas. They include: Making permanent the research tax credit; Extending 100 percent bonus depreciation; Imposing a new minimum tax for … [Read more...]
New Tax on Investment Income in 2013
Historically, Medicare taxes have been imposed exclusively on income from earned income and not on income from investment activities. However beginning in 2013 investors may be subject to the medicare tax on investment income if their income exceeds certain thresholds, $200,000 for individuals and $250,000 for married couples filing jointly. The medicare tax rate is 3.8 percent. This 3.8-percent tax applies to the lesser of the taxpayer’s (1) "net investment income" or (2) the excess of adjusted gross income (AGI) over the applicable threshold. Example 1. Barry earns $400,000 as an employee while his wife, Michelle, receives interest income and dividends of $25,000. Their combined AGI, therefore, is $425,000, so the excess over … [Read more...]
2012 Brings Changes to IRS Collection Rules
This year, the IRS made a significant change to the installment agreement request for individuals with unpaid liabilities of more than $25,000 and less than $50,000. Taxpayers can obtain and installment agreement without filing a detailed financial statement and supporting documentation if their outstanding tax liability meets the above thresholds. Taxpayers can submit an installment agreement request to pay the tax liability in full within 72 months or within the collection statute of limitations, whichever is shorter. … [Read more...]
2012 Depreciation Changes
Section 179 Expense Election Section 179 allows taxpayers to deduct 100% of the cost of tangible personal property in the year of acquisition subject to limitation. For tax years beginning in 2012 the maximum amount of additions deductible has been decreased to $139,000 from $500,000. The Section 179 dollar limitation is reduced dollar for dollar by the cost of qualified property placed in service that exceeds $560,000 in 2012, down from $2,000,000 in 2011. Bonus Depreciation In order to stimulate the economy Congress has enacted special bonus depreciation in the year of acquisition for certain purchases of new tangible personal property. In 2011 this amount was 100%, for 2012 the special depreciation percentage will be 50% for … [Read more...]
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