TAX LAW UPDATE:
ITS IMPACT & PLANNING FOR
2012 AND THE FUTURE
The Guru Tax & Financial
Services, Inc.
Satya B. Mitra
Ph.D., E.A., CFP®
508-797-0005
U. S. INCOME TAX HISTORY
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In 1913 tax revenue was 3% of GDP
Currently it is 15-20% of GDP
Noteworthy changes from FDR to Reagan to
Clinton to George W. Bush
WHERE DO YOUR TAXES GO?
CURRENT MAJOR FACTORS TO
IMPACT TAX LAWS
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High U.S. debt: $16T
Huge budget deficit, 2011: $1.3T
Stubborn unemployment
Cost of social security / health care
78 million retiring baby boomers
Growing political discontent & disagreement
Presidential election result
INCOME TAX RATES


Income tax
brackets
(married filing
jointly)
36% / 39.6%
brackets return
CAPITAL GAINS RATES

Long-term capital gains rates are scheduled to
increase from 0 to 10% for the 10 and 15%
brackets.
DIVIDEND RATES

Dividend rates could
increase from 15% to
36% or 39.6%
depending on a
taxpayer’s marginal
tax rate
MEDICARE EXCISE TAX

EXTRA 3.8% TAX LIABILITY ON UNEARNED INCOME FOR
AGI OVER $200,000 (SINGLE) AND $250,000 (MFJ)
 Capital
gain
 Dividends
 Interest
 Royalty
 Net rental income
Long-Term Capital Gain
Every $10,000
Capital Gain Tax at 20%
$2,000
Medicare Excise Tax at 3.8%
$380
Total Tax Due:
$2,380
CHANGE IN MEDICARE TAX FOR
HIGH EARNING EMPLOYEES

Additional 2.35% on earnings over
$250,000.00
AMT PATCH EXPIRING:
A HUGE IMPACT

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4 MILLION IN 2011
EXPECTED 31 MILLION IN 2012
AMT IN 2013?
GIVE YOUR GIFT IN 2012:
GIFTING IN 2013 COULD BE COSTLY.


LIMIT CHANGES FROM
$5.12M TO $1M!!!
ESTATE PLANNING AND HIGHEST
ESTATE TAX RATES

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Jump from 35% to 55% in 2013
Exemption amount in 2012 is $5.12M
Expected to go down to $1M in 2013
DIRECT DONATION OF IRA
DISTRIBUTION TO CHARITY

NOT AVAILABLE IN 2012
DEDUCTIONS EXPIRED FOR YEAR
2012
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Mortgage insurance premium
Classroom expenses ($250) for teachers
General sales tax vs. State income tax deduction
Non business energy efficiency credit
OTHER SIGNIFICANT TAX LAWS
EXPIRING AFTER YEAR 2012
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Social security 2% tax cut
$1,000 child tax credit
7.5% medical expense deduction
Full use of deductions and exemptions
$2,500 American opportunity tax credit
Enhanced depreciation
Exemption from mortgage debt forgiveness
DECLARTION OF FOREIGN BANK
ACCOUNT AND FOREIGN ASSETS


Offshore Voluntary Disclosure Program (OVDP)
Possible serious penalties and tax liability
ELECTION IMPACT

President Obama
 Renew
the cuts for those making under $250,000
 Have wealthy pay their fair share

Mitt Romney
 Maintain
lower income tax rates
 Make Bush tax cuts permanent for savings and
investments
PLANNING STRATEGY (PART 1)
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•
Income acceleration & income deferral
Deductions acceleration & deductions deferral
Keep AMT in equation before exercising stock
options
Sell assets with gain in 2012
Consider yearly dividend earnings from
investments
High net worth tax payers consider $5M lifetime
gifting to reduce estate tax
PLANNING STRATEGY (PART 2)
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Business owners plan on setting up right
retirement plan, hiring veterans, purchasing
vehicles over 6,000 pounds
Hire your children under 18 in your business
Invest in municipal bonds, growth oriented
mutual funds, annuity, life insurance
Consider Roth IRA conversion
Contribute appreciated stocks to charity
AUDITS
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IRS, DET and state audits have significantly
increased
Keep good records
Proofs of all deductions for at least 3 years
FUTURE OF TAX LAW, THE
ELECTION, LEGISLATION BY
CONGRESS AFTER ELECTION, THE
EXTENSION OR REPEAL OF BUSH
TAX LAWS…
ALL ABSOLUTELY UNCERTAIN.
STAY TUNED.
THE MESSAGE TO YOUR CLIENT IS
“PLAN”
Pay
Less
Act
Now

THANKS
FOR YOUR ATTENTION