As 2012 comes to a close in a few short hours, it’s time for American taxpayers to ring in the New Year hoping that they planned their finances correctly in anticipation of a number of significant changes to the federal tax code in 2013 Get your bungee-cords ready folks ~ looks like we’re going over that fiscal cliff!
American Taxpayers are facing new taxes in 2013 as the result of the 2010 Patient Protection and Affordable Care Act (“Obamacare”); and, several key tax breaks, including the Bush-era tax cuts, will disappear at midnight tonight, unless President Obama and Congress take quick action. (They better be really quick!) Here’s an overview of some of the major tax changes ahead for 2013 (tomorrow morning) January 1, 2013:
Income Taxes: The fate of the Bush-era reductions to the individual income tax rates will likely go bye-bye because President Obama and Congress disagree on how to treat American taxpayers in the highest income brackets. If nothing is done, the current 10, 15, 25, 28, 33 and 35 percent rate structure will be replaced by the higher pre-Bush 15, 28, 31, 36 and 39.6 percent rates.
Medicare Contribution Tax: Beginning Jan. 1, 2013, a new 3.8 percent “unearned income Medicare contribution” will be imposed on the net investment income of higher-income individuals, estates, and trusts. This new surtax will generally apply to passive income and to capital gains from the disposition of property. This includes ANY property or land which may have been in a family for several generations, like FARMS!
Additional Medicare Tax: Beginning Jan. 1, higher income individuals will be subject to an additional 0.9 percent Medicare tax. This is in addition to the 3.8 Medicare surtax.
Higher Payroll Taxes: Unless extended again by Congress and signed by the president, the 2 percent reduction in the Social Security tax paid by employees and self-employed individuals will end. Taxes had been reduced from 6.2 percent to 4.2 percent the past two years. Get ready, folks ~ your take home pay from your next paycheck is going down!
Passive income: Passive income, such as rents and royalties, also will be subject to the 3.8 percent net investment tax next year. Passive activity planning is a complicated area of tax law, so definitely consult with your tax professional.
Estate planning: The maximum federal estate tax rate for 2013 is scheduled to rise from the current 35 percent to 55 percent. Again, unless Congress acts, the current estate and gift tax exemption of $5.12 million is set to revert back to $1 million. In my opinion, the federal government is really committing grand larceny here by taxing money that has already been taxed & paid for by the individual who originally earned it. Isn’t that called “double jeopardy”?
By the way, did you know that Congress will be getting a Pay Raise in 2013? All this for doing NOTHING! It’s amazing to realize that most of our Congress, Senate & President, etc., do not enter office as millionaires, but usually do leave office (even if only after one term) with a pension, full benefits, book deals & a million bucks or more in the bank! As an American & a Navy Veteran the current state of our nation and Federal government makes me sick and very sad that so many Americans would rather have “free stuff” from the government instead of knowing the pride of self-reliance, of earning it yourself and the freedom of individual choice; based upon their own values, morals, beliefs & faiths~ as I do as an American.
Happy New Year!