skoda minotti speaker series - strategies to save on your 2013 taxes
DESCRIPTION
From the repeal of the Bush-era tax cuts to the implementation of the Affordable Care Act, there was a lot of change in United States tax law this year for both businesses and individuals. With so many new laws to parse through, it's easy to feel overwhelmed as you prepare your 2013 tax information. Unclear about your current tax bracket? Want to know how the Affordable Care Act affects your business? This presentation will provide you with several easy-to-implement strategies for your personal and business taxes. What you can expect to learn: • Tax law changes for 2013 • Year-end tax planning strategies, for businesses and individuals • How patient protection laws affect you • The Affordable Care Act and how it will affect businessesTRANSCRIPT
`
Simple Strategies To Save On Your 2013 Taxes
Michael L. Minotti, CPAMichael Soful, CPAJenna Staton, EA
December 12, 2013
SKODA MINOTTI TEAM
Michael Minotti, CPA President, Skoda Minotti
Partner
Mike Soful, CPAPartner
Jenna Staton, EA Manager
SKODA MINOTTI TEAM
Jeff Foster, CPAPartner
Susan Licate, MBASenior Marketing Specialist
Robin ThomasMarketing Coordinator
Kenny Goodwin, CPASenior Manager
Tim Stiller, CPAManager
TODAY’S AGENDA
Business Tax Changes Patient Protection and Affordable Care Act Personal Tax Changes Medicare Tax Changes
UPDATE
Due to the government shutdown, the IRS will not be accepting paper filed
or electronically filed returns until February 4, 2014
Provisions Expiring Various temporary tax provisions will be expiring December 31, 2013
Research Credit Work Opportunity Credit Differential Wage Credit for Activated Military Reservists Enhanced deduction for charitable contributions of food inventory Tax incentives for empowerment zones Indian employment credit
BUSINESS TAX CHANGES
TODAY’S AGENDA
Provisions ExpiringContinued provisions expiring December 31, 2013
Low-income tax credits for non-federally subsidized new buildings
Low-Income housing tax credit treatment of military housing allowances
Adjusted-basis reduction of stock after S corporation charitable deduction of property
Recognition period for S corporation built in gains 100% exclusion of small business stock sale or exchange
BUSINESS TAX CHANGES
Bonus Depreciation 50% first-year bonus depreciation - 2013 0% first-year bonus depreciation - 2014 Qualified property is tangible property depreciated under
MACRS with a recovery period of 20 years or less Must meet original use, timely acquisition, and timely placed
in service requirements Applies automatically; must opt-out by asset class Can create a loss
BUSINESS TAX CHANGES
Section 179 – Expensing Election Dollar Limitations
− $500,000 for 2013− $25,000 for 2014
Reduction in Limitations− $2,000,000 for 2013− $200,000 for 2014
Section 179 cannot create a loss Available for used property
BUSINESS TAX CHANGES
First Year Depreciation Cap for Autos & Trucks For 2013 the luxury auto limit was scheduled to be
$3,160 for autos and $3,360 for light trucks and vans The applicable first-year depreciation limit has been
increased by $8,000− $11,160 for autos− $11,360 for light trucks and vans
BUSINESS TAX CHANGES
TODAY’S AGENDA
StraightLine
MACRSBonus
Plus MACRSSection
179
2013 $5,000 $10,000 $30,000 $50,000
2014 10,000 16,000 8,000 -
2015 10,000 9,600 4,800 -
2016 10,000 5,760 2,880 -
2017 10,000 5,760 2,880 -
2018 5,000 2,880 1,440 ______-
$50,000 $50,000 $50,000 $50,000
Depreciation ExamplePurchase $50,000 of computers in 2013 (Assume 5-year life.)
BUSINESS TAX CHANGES
TODAY’S AGENDA
Straight Line
MACRS BonusSection
179
2013 $75,000 $150,000 $450,000* $650,000**
2014 150,000 240,000 120,000 40,000
2015 150,000 144,000 72,000 24,000
2016 150,000 86,400 43,200 14,400
2017 150,000 86,400 43,200 14,400
2018 75,000 43,200 21,600 7,200
$750,000 $750,000 $750,000 $750,000
*$375,000 Bonus, $75,000 MACRS**$500,000 Section 179, $125,000 Bonus, $25,000 MACRS
Depreciation ExamplePurchase $750,000 Machine ( Assume 5-year life.)
BUSINESS TAX CHANGES
BUSINESS TAX CHANGES
What To Look For Repairs & Maintenance Capitalization Building & Equipment Materials & Supplies
Final Regulations on Repair vs. Capitalization Standards
What You Will Find De Minimis Rule Routine Maintenance Safe
Harbor Small Taxpayer Safe Harbor
for Buildings Betterment/Restoration Effective for 2014 (but can be
applied to 2012 & 2013)
For tax years beginning ___________ and forward, (Name of Business) elects to treat as an expense for both book and income tax purposes property with a cost of $________, or less, including items that have a useful life of 12 months or less. It is (Name of Business’s) intention that this election complies with the IRS Section 1.263(a)-1(f) de minimis safe harbor election.
(Officer Signature) (date)
CAPITALIZATION POLICYDE MINIMUS
TODAY’S AGENDA
Straight Line
Bonus/MACRS
Section179
De Minimis
2014 $7,500 $15,000 $35,000 $75,000
2015 15,000 24,000 16,000 -
2016 15,000 14,400 9,600 -
2017 15,000 8,640 5,760 -
2018 15,000 5,184 3,456 -
2019 and on 7,500 7,776 5,184 ______-
$75,000 $75,000 $75,000 $75,000
Depreciation/De Minimis ExamplePurchase 50 Computers @ $1500 each ( Assume 5-year life.)
BUSINESS TAX CHANGES
Cost Segregation
TAX IDEA
What to Look For Depreciable real estate > $1MM Tax paying entity Built or acquired after 1986
What You Will Find Accelerate depreciation deductions Time value of money Immediate cash
Research & Development CreditTAX IDEA
What to Look For Means, Methods, and Techniques Structure and Facility Design for
Constructability Construction Equipment
Development and Improvements Design for LEED/green initiatives HVAC Design Electrical System Design Building Information Modeling (BIM) Analysis of a design to improve
performance, reliability, quality, safety and/or life cycle costs
Requests for Information (RFIs) Mechanical Equipment Sizing
What You Will Find Generate R&D tax credit = 6.0% of
qualified R&D Amend prior year tax returns Immediate cash AMT
Prepaid Expenses
TAX IDEA
What to Look For Material Prepaid Expenses
Prepaid insurance Prepaid maintenance
agreements
What You Will Find Automatic method change allows
tax payer to deduct prepaid expenses on a cash basis
Reduced federal, state, and local tax liability
Energy Cost Savings Audit
BUSINESS IDEA
What to Look For Any company with energy costs Electric Gas Lighting Retrofit
What You Will Find 10 - 40% savings
Patient Protection and Affordable Care Act (PPACA)
Affordable Care Act or “Obamacare” Most significant overhaul since Medicare and
Medicaid enacted in 1965 Goals
− Increase quality and affordability− Lower uninsured rate
− Reducing costs for individuals and government Require insurance companies to cover all
applicants Same rates regardless of pre-existing condition
or gender
WHAT IS PPACA?
Do I have 50 full-time equivalent (FTE) employees subjecting me to the PPACA requirements? What types of workers must be counted?
“Common law employee”
What is a common law employee? Remember the 20 Question Test
Who is not a common law employee? Independent Contractors Sole Proprietors 2% S Corp Shareholders Partners in a Partnership
AM I SUBJECT TO PPACA?
Full time – employees that work at least 30 hours per week in any month
Part time – calculated by taking the hours worked by all part-time employees in a month and divide by 120
Seasonal – not counted for those working up to 120 days in a year
FULL TIME EQUIVALENT
Bright Idea? Company has 55 full time employees
Needs/Capacity 55 x 160 = 8,800 hours
Change make-up of employees 30 full time – add overtime 30 x 180 = 5,400
20 part time – get below 120 20 x 110 = 2,20015 fill in 15 x 80 = 1,400
8,800 hours
AM I SUBJECT TO PPACA?
Calculation of Full Time Equivalent
FULL TIME EQUIVALENT
HOURS FTEFULL TIME N/A 30
PART TIME20 @ 110 2,200 15 @ 80 1,200
3,400 ÷120 28
58
Further Definitions – Who gets counted? Leased employeesTemporary agency employeesEmployees who work overseasForeign workersUnion employeesRetirees
FULL TIME EQUIVALENT
Must Offer Coverage If I fail to offer to 95% of full-time employees and one person
goes to exchange and receives premium credit $2,000 penalty per full-time employee, not counting first 30
If you offer to 95% or more and one person goes to exchange and receives premium credit $3,000 penalty per excluded employee who gets credit
A LARGE EMPLOYERNOW THAT I AM
Large employer must offer healthcare that is 1. Affordable coverage
2. Minimum coverage
THE TWO-PART TEST
The cost of the plan to the employee cannot exceed 9.5% of the household's adjusted gross income for the taxable year (this includes spouses and dependents who are required to file a federal tax return)
How does an employer know the employee's household adjusted gross income? − W-2 Safe Harbor− Rate of Pay Safe Harbor− Federal Poverty Line Safe Harbor
AFFORDABLE COVERAGEDEFINITION OF
Minimum coverage means the insurance plan must cover 60 percent of the cost of the essential health benefits
The essential health benefits include emergency services, ambulatory services, hospitalization, lab services, prescription drug coverage and maternity and newborn care, among others
Vision and dental are not included
MINIMUM COVERAGEDEFINITION OF
What happens if I fail to comply with part one of the two-part test? If an employer:
Fails to offer a full-time employee (or one of their dependents) coverage; and,
The employee receives a subsidy (either a tax credit or cost-sharing reduction) through the exchange for purchasing health insurance
The employer will be liable for a $2,000 penalty per year for the total number of full-time employees (not counting the first 30 employees)
WHAT HAPPENS?
What happens if I fail to comply with part two of the two-part test? If an employer offers its full-time employees (and dependents)
coverage but the coverage is either:1. Unaffordable2. Does not provide minimum coverage
The employer will be liable for a penalty of $3,000 per year, times the number of full-time employees who receive insurance through the exchange
WHAT HAPPENS?
Open enrollment is scheduled to run from
October 1, 2013 through February 28, 2014.
DO I NEED TO ACT? HOW QUICKLY
My business is subject to PPACA ─ now what?
Determine if your plan provides “minimum essential coverage” Policy must include physician and mid-level practitioner care,
hospital and emergency room services, pharmacy, laboratory and imaging
Compare the amount that you are charging employees for coverage to the PPACA affordability guidelines
Affordable = individual employee coverage does not exceed 9.5% of the employee’s household income for the year
Household income = W-2, hourly rate of pay x 130 hours/month, or federal poverty line
NOW WHAT?
My business is subject to PPACA ─ now what?
Make certain that the insurance is offered to 95% of your full time employees
If you fail the tests, weigh the cost of correction (better policy, lower employee cost) against payment of the excise taxes
Human Resource issues
NOW WHAT?
My business is not subject to PPACA ─ now what?
Continually monitor your FTE count to see if you will potentially become subject to PPACA
Coverage level thoughts:− Continue current coverage− Compare exchange rates to your current coverage rates− Shop coverage
NOW WHAT?
My business might be subject to PPACA ─ now what?
Analyze FTE count to see if the 50 employee threshold is met
Take personnel action to keep the count below 50,if desired
If you are close, analyze whether your plan coverage, employee offering level and cost sharing structure will satisfy PPACA’s rules
NOW WHAT?
PERSONAL TAX CHANGES
Highlights
Bush tax cuts retained for most taxpayers Raises top rate for income, dividends and capital
gains Permanently “patches” AMT Return of phase outs of itemized deductions and
personal exemptions
PERSONAL TAX CHANGES
TODAY’S AGENDA
NEW TAX RATES2013 Taxable
Income2013 Taxable
IncomeTaxpayer Capital Gains
Single MFJ Tax Rate Tax Rate
$0-$8,925 $0-$17,850 10% 0%
$8,925-$36,250 $17,850-$72,500
15% 0%
$36,251-$87,850 $72,501-$146,400 25% 15%
$87,851-$183,250 $142,401-$223,051 28% 15%
$183,251-$398,350 $223,051-$398,350 33% 15%
$388,351 -$400,000 $388,351 -$450,000 35% 15%
$400,000 + $450,001 + 39.6% 20%
TODAY’S AGENDA
AMT Permanent Patch
Alternative Minimum Tax (AMT) Relief Increased exemption for 2013 $51,900 Single; $80,800 MFJ Indexed for inflation – 2014 $52,800 Single; $82,100 MFJ
PERSONAL TAX CHANGES
TODAY’S AGENDA
Future of AMT Could be abolished in the future Obama proposed to replace part of the AMT with the so-called
“Buffet Rule Buffet Rule would ensure taxpayer making over $1 million would
pay an effective rate of at least 30 percent. 2012 – Senate rejected the “Paying a Fair Share Act”
PERSONAL TAX CHANGES
TODAY’S AGENDA
General Tax Planning Strategies Defer maximum salary to 401k or SEP Defer maximum into HSA plans Accelerate charitable contributions Pay January house payment early Bunch medical expenses Year end security sales for losses
Strategies If You’re NOT in Alternative Minimum Tax Accelerate payment of State, Local and Real Estate
Taxes
PERSONAL TAX CHANGES
TODAY’S AGENDA
Defer Maximum 401k or SEP 2013 and 2014 maximum for 401k = $17,500
Over 50 may contribute additional $5,500 2013 and 2014 maximum for SEP = 25% of total income up
to $52,000
Defer Maximum into HSA Plans 2013 – Individual $3,250 2013 – Family $6,450
Over 55 may contribute additional $1,000
2014 – Individual $3,300 2014 – Family $6,650
Over 55 may contribute additional $1,000
PERSONAL TAX CHANGES
TODAY’S AGENDA
Accelerate Charitable Contributions Cash to 501(c)(3) charities
Includes gifts made on credit cards Charitable Gift Annuities Non-Cash household goods and clothing
http://satruck.org/donation-value-guide
PERSONAL TAX CHANGES
TODAY’S AGENDA
Bunch Medical Expenses Deduct unreimbursed medical expenses greater
than 10% of Adjusted Gross Income 65 and older allowed to deduct 7.5% of Adjusted
Gross Income Example: $100,000 of AGI, must have $10,000 in
medical expenses before getting $1 of deduction Includes Long Term Care Insurance Premiums Must have prescription for deduction for any
medications Cannot deduct over the counter medication and
vitamins
PERSONAL TAX CHANGES
TODAY’S AGENDA
Year End Security Sales For Losses May deduct up to $3,000 in investment losses against
ordinary income Wash sale rules
PERSONAL TAX CHANGES
TODAY’S AGENDA
Return of Phase Outs
Itemized Deduction Phase Out− Reduces itemized deductions by 3% of the amount by which AGI
exceeds threshold, not to exceed 80%− Single $250,000 MFJ $300,000
Personal Exemption Phase Out− Reduces exemption by 2% for each $2,500 (or portion thereof) by
which AGI exceeds threshold− Single $250,000, MFJ $300,000
PERSONAL TAX CHANGES
TODAY’S AGENDA
PERSONAL TAX CHANGESIndividual Tax Credits Available in 2013
Adoption Credit – Available if you adopted a child and paid-out-of-pocket expenses relating to the adoption− The maximum value of the credit is $12,970 per eligible and it
is non-refundable− Phase-out is between $194,580 - $234,580
TODAY’S AGENDA
PERSONAL TAX CHANGES
Child and Dependent Care Credit – Available if child is under 12 years of age, or a dependent of any age who cannot care for themselves.
− The value of the credit depends on AGI and is between 20% - 35% of qualified expense
− The maximum amount of qualified expenses that can be claimed is $3,000 for one child and $6,000 for two or more children
TODAY’S AGENDA
PERSONAL TAX CHANGES
Retirement Savings Credit – Credit available for low to moderate income workers who contribute to a qualified plan. AGI must be less than:
− $59,000 Married filing jointly− $44,250 Head of Household− $29,500 Single
TODAY’S AGENDA
PERSONAL TAX CHANGESEnergy Credits
A tax credit of 10% of up to $500 (for all tax years after 2005 and only $200 can be used for windows) is still available.
The 30% (with no upper limit) credit for geothermal heat pumps, small wind turbines, and solar energy systems does not expire until December 31, 2016
TODAY’S AGENDA
PERSONAL TAX CHANGESPopular Tax Provisions Expiring December 31, 2013
$250 above-the-line annual deduction for professional educator’s qualified unreimbursed expenses
Exclusion from gross income for discharges of qualified principal residence indebtedness
Itemized deduction for mortgage insurance premiums Election to claim deduction for state and local sales tax in lieu of
state and local income taxes Exclusion from gross income of charitable distributions for
individuals aged 70 ½ or older Residential energy property credit
MEDICARE TAX CHANGES
TODAY’S AGENDA
MEDICARE TAX CHANGESPatient Protection and Affordable Care Act – Two Parts
0.9% increased Medicare tax due on wages and self-employment earnings
3.8% surtax on at least a portion of investment income such as capital gains, dividends and net rental income
TODAY’S AGENDA
Tax Earnings
An additional 0.9% surtax on higher income households
The tax applies to wages andself-employment income inexcess of threshold
There is no employer match onthe 0.9 percent tax
Thresholds
Single Taxpayer $200,000
Married Taxpayers Filing Jointly $250,000
MEDICARE TAX CHANGES
Tax Earnings
Ron Single Taxpayer Employee $500,000 Earnings
Excess of Earning Threshold
$500,000- 200,000 $300,000
Single ax Payer $200,000
Married taxpayers filing\jointly
$250,000
.9% Surtax Would APPLY
to $300,000=
$2,700 Additional Tax
MEDICARE TAX CHANGES
MEDICARE TAX CHANGES
Single ax Payer $200,000
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Overview
Investment Income Beginning with the 2013 tax year, a new 3.8% Medicare “surtax”
will apply to all taxpayers whose income exceeds a certain “threshold amount”
This new “surtax” will, in essence, raise the marginal income tax rate for affected taxpayers
Thus, a taxpayer in the 39.6% tax bracket (i.e. the highest marginal income tax rate in 2013) would have a marginal rate of 43.4%!
Single ax Payer $200,000
Married taxpayers filing\jointly
$250,000
Current Tax Rate Tax Rate in 2013 Tax Rate in 2013 + (with surtax)
10% 15% 15%
15% 15% 15%
25% 28% 28%
28% 31% 34.8%
33% 36% 39.8%
35% 39.6% 43.4%
NOTE: The chart above assumes that the 3.8% Medicare surtax would not begin to apply until a person’s taxable income reaches the 31% tax bracket (based on certain net investment income and itemized deduction assumptions). However, there are times when the 3.8% could apply to a person in a lower tax bracket (i.e. 15%, 28%) or may not apply to a person in higher tax brackets (31%, 36%, 39.6%).
3.8% Medicare ‘Surtax’ Overview
MEDICARE TAX CHANGES
MEDICARE TAX CHANGES
Single ax Payer $200,000
Married taxpayers filing\jointly
$250,000
3.8% X the lesser of
1. Net Investment Income OR
2. The Excess (if any) of – • “Modified Adjustable Gross
Income (MAGI)• “Threshold Amount
3.8% Medicare ‘Surtax’ Overview – Individuals
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Overview – Critical Terms
Three critical terms associated with the 3.8% Medicare surtax “Net investment income” (NII) “Threshold amount” (TA) “Modified adjusted gross income” (MAGI)
3.8% MEDICARE ‘SURTAX’
Married taxpayers filing\jointly
$250,000
Subject to Surtax:• Taxable Interest• Dividends• Annuity Income• Passive Royalties• Rents
Exempt from Surtax:• Wages• Exempt Interest• Active Royalties• IRA Distributions• 401(k) Distributions• Pension Income• RMDs• Social Security Income
OVERVIEW – NII
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Overview – Threshold Amount
“Threshold Amount” Is the key factor in determining the “lesser of” formula for
purposes of calculating the surtax
Threshold Amounts Single taxpayers — $200,000 Married taxpayers — $250,000
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Overview – MAGI
“Modified Adjusted Gross Income” Is the amount that is compared to the “threshold amount” to
determine the “net investment income” that is subject to the surtax
MAGI Equals Adjusted gross income
− i.e., Form 1040, Line 37 PLUS Net foreign earned income exclusion
− i.e., gross income excluded under the foreign earned income exclusion less certain deductions or exclusions that were disallowed due to the foreign earned income exclusion
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Example
John Single Taxpayer $100,000 of Salary $50,000 Net Investment Income
MAGI is $150,000
Threshold is $200,000
3.8% Surtax Would NOT
Apply
MAGI is Less Than
Threshold
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Example
Linda Single Taxpayer $0 Employment Income $225,000 Net Investment Income
Excess of MAGI Over Threshold
$225,000- 200,000 $ 25,000
3.8% Surtax Would Apply
to $25,000
Tax = $950
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Example
Tina & Terry Married, Filing Jointly $300,000 Combined Salary $0 net Investment Income
MAGI is $300,000Threshold is $250,000
Excess is $50,000
3.8% Surtax Would NOT
Apply
Wages Exempt
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Example
Peter & Paula Married, Filing Jointly $400,000 Salary Income $50,000 Net Investment Income
Excess of MAGI Over Threshold
$450,000- 250,000 $200,000 But $50,000 < $200,000
3.8% Surtax Would Apply
to$50,000
Tax = $1,900
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
3.8% Medicare ‘Surtax’ Example
Sarah & Scott Married, filing jointly $200,000 salary income $150,000 net investment income
Excess of MAGI Over Threshold
$350,000- 250,000 $100,000
3.8% Surtax would apply to $100,000
Tax = $3,800
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
PLEASE NOTE
A taxpayer should never pay both the 0.9% tax on earned income and the 3.8% surtax on net investment income on the same item of income!
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
What Else is Exempt?
S Corp distributions to owners who materially participate Rents received by “real estate professionals” who
materially participate in underlying rental activity Grouping of rental activities with businesses in which
owners materially participate Re-characterized rents received from businesses in which
owner materially participates (whether or not PAL grouping election has been made)
Married taxpayers filing\jointly
$250,000
Applications to S Corp Earnings
K-1 profits for S Corp owners who materially participate are not subject to either the 0.9% tax on earned income OR the 3.8% surtax on net investment income
Distinguish portfolio income which is separately stated Passive owners would still be subject to the 3.8% surtax
MEDICARE TAX CHANGES
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
Applications to S Corp Interest
For material participants, only net gain or loss attributable to property held by the entity which is not “property attributable to an active trade or business” is taken into account (e.g. stocks, bonds, other investment property) for the 3.8% surtax
For passive investors, any and all gain or loss will be included in calculating net investment income
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
Applications to Partnership Earnings
Earnings for partners who materially participate are not subject to the 3.8% tax on net investment income BUT will be subject to the 0.9% tax on earned income
Passive owners are just the opposite− They would be subject to the 3.8% surtax on NII, but not the
0.9% tax on earned income
MEDICARE TAX CHANGES
Married taxpayers filing\jointly
$250,000
Applications to Partnership Interest
For material participants, only net gain or loss attributable to property held by the entity which is not “property attributable to an active trade or business” is taken into account (e.g. stocks, bonds, other investment property) for the 3.8% surtax
For passive investors, any and all gain or loss will be included in calculating Net Investment Income
MEDICARE TAX CHANGES
Entity Materially Participate
3.8% Tax .9% Tax
S-Corp Yes No No
S-Corp No Yes No
Partnership Yes No Yes
Partnership No Yes No
Trade or Business Activity
Understanding the ‘Surtax’ Code 469 PAL Rules
SINGLE TAXPAYER
Married taxpayers filing\jointly
$250,000
2012 2013 Change
Wages $200,000 $200,000
Itemized Deductions (8,900) (8,900)
Exemptions (3,800) (3,900)
Taxable Income $187,300 $187,200
Federal Income Tax $ 46,337 $ 45,907 ($430)
SINGLE TAXPAYER
Married taxpayers filing\jointly
$250,000
2012 2013 Change
Wages $250,000 $250,000
Itemized Deductions (11,814) (11,814)
Exemptions (3,800) (3,900)
Taxable Income $234,386 $234,286
Federal Income Tax $ 61,957 $ 61,445 ($512)
Surtax - 450 450
Total $ 61,957 $ 61,895 ($ 62)
Surtax is .9% on excess wage of $250,000 - $200,000 threshold.
SINGLE TAXPAYER
Married taxpayers filing\jointly
$250,000
2012 2013 Change
Wages $200,000 $200,000
Rents 50,000 50,000
Itemized Deductions (11,814) (11,814)
Exemptions (3,800) (3,900)
Taxable Income $234,386 $234,386
Federal Income Tax $ 61,957 $ 61,445 ($512)
Surtax -___ 1,900 1,900
Total $ 61,957 $ 63,345 $1,388
Surtax of 3.8% on rents of $50,000 No surtax if married filing joint return.
SINGLE TAXPAYER 2012 2013 Change
Wages $450,000 $450,000
Capital Gains 100,000 100,000
Itemized Deductions (29,589) (20,589) (9,000)
Exemptions (3,800) -___ (3,800)
Taxable Income $516,611 $529,411 $12,800
Federal Income Tax $137,575 $147,811 $10,236
Surtax 3.8% -___ 3,800 3,800
$137,575 $151,611 $14,036
Surtax of 3.8% on capital gains of $100,000.Additional $2,250 in the .9% surtax with held at source.
SINGLE TAXPAYER
Married taxpayers filing\jointly
$250,000
2012 2013 Change
Retirement Income $150,000 $150,000
Social Security 17,000 17,000
Dividends 50,000 50,000
Itemized Deductions (8,900) (8,900)
Exemption (3,800) (3,900)
Taxable Income $204,300 $204,200
Federal Income Tax $ 44,557 $ 43,969 ($588)
Surtax 3.8% -___ 646 646
Total Tax $ 44,557 $ 44,615 $ 58
MARRIED TAXPAYERS
Married taxpayers filing\jointly
$250,000
2012 2013 Change
Wages $280,000 $280,000
Interest 10,000 10,000
Dividends 30,000 30,000
Business Income 90,000 90,000
Capital Gains 50,000 50,000
SE Tax Deduction (1,205) (1,205)
Itemized Deductions (24,065) (19,301) (4,764)
Exemptions (7,600) -____ (7,600)
Taxable Income $427,130 $439,494 $12,364
MARRIED TAXPAYERS 2012 2013 Change
Federal Income Tax $103,459 $106,946 3,487
AMT 10,669 6,456 (4,213)
114,128 113,402 (726)
Self-Employment Tax 2,410 2,410 -
Surtax 3.8%Surtax .9%
- -____
3,420 1,080
3,420 1,080
Total Tax $116,538 $120,312 $3,774
Surtax of 3.8% on NII of $90,000 ($10,000 + $30,000 + $50,000)
Surtax of .9% on wages of $280,000 + profits of $90,000 less threshold
Michael [email protected]
Mike [email protected]
www.skodaminotti.com
Cleveland 440-449-6800 Akron 330-668-1100
QUESTIONS?
Jenna [email protected]
Thank You