Key Financial Data for 2013
You have probably heard the phrase the fiscal cliff being used quite a bit lately. The term has been used to describe changes that are set to take effect January 1, 2013. These changes include: higher tax rates, expiring tax benefits, new taxes on high income individuals, and automatic spending cuts. It is a lot to take in, but here are the basic 2013 tax considerations for doctors.
Current federal income tax rates in effect for over ten years are set to change at the end of the year, with the top rate increasing from 35% to 39.6%. In addition, the maximum rate that generally applies to long term capital gains, is scheduled to return to its pre-2003 level beginning in 2013. Qualifying dividends will again be taxed as ordinary income rather than at long-term capital gains rates. The temporary 2% reduction in the Social Security portion of the pay roll tax, in place for the last two years, also expires at year end, as do significant estate and gift tax provisions.
That is not all, as things stand now, more individuals will likely find themselves subject to the alternative minimum tax (AMT) when the file their 2012 federal income tax returns. Since lower AMT exemption amounts went into effect at the beginning of 2012. Other expiring tax provisions will significantly curtail popular tax credits and deductions. 2013 will also see the imposition of two new taxes. Beginning in 2013, the hospital insurance or Medicare portion of the payroll tax will increase by 0.9% for high-wage individuals. And a new 3.8% Medicare contribution tax will be imposed on some or all of the net investment income of individuals with high modified adjusted gross incomes. Finally, legislation passed in 2011, imposed mandatory spending cuts, a total of $1.2 trillion over several years. The cuts, which are to be split evenly between defense spending and non-defense spending, are scheduled to begin taking effect in 2013. Of course Congress may act to extend some or all of the expiring tax provisions or address the scheduled spending cuts. What happens if Congress does not act though? The Congressional budget office estimates that should all tax changes and spending cut take effect as scheduled in 2013, the fiscal tightening will likely lead to a recession. While there is still time for Congress to act, the window is closing. So stay tuned, and pay attention.
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The information contained on this website should not be considered tax advice. A professional tax adviser who is familiar with all the relevant facts pertaining to your particular situation should be consulted before taking any action.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide tax advice or services. Please consult the appropriate professional regarding your tax planning needs.