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Tax Ramifications of 2013

 

As we begin 2012, all real estate investors need to pay very close attention to the ever changes with taxes coming up in the future.  Particular attention needs to be paid to the significant tax increases to occur in 2013.  

Investors considering whether or not to sell now and pay their taxes must consider the tax implications. Real estate investors will have a much greater tax burden in 2013 than in 2012. Many may want to make the calculated decision to sell in 2012 before they hit the changes that will arrive in 2013.

Tax Rate Changes for
2012 and 2013

     

2012

2013

Ordinary income

35%

39.6%

Qualified Dividends

15%

39.6%

Capital Gains Tax

15%

20%

     
 

Medicare Tax

Beginning January 1, 2013 a new Medicare tax of 3.8%  will be applied to investment income of those investors with a modified adjusted gross income of over $200,000 ($250,000 for couples filing jointly).  The tax applies to the lesser of the (1) total investment income for the year, and (2) the amount by which the individual’s total income exceeds the threshold.  For example a single individual taxpayer who has $150,000 of investment income and $125,000 of other income will pay the new Medicare tax on $75,000(the amount by which the individuals’ income exceeds the $200,000 threshold. Because the threshold amounts for the new Medicare tax are not indexed for inflation, more taxpayers will be subject to the new Medicare Tax over time. 

Gifting

2012

2013

Lifetime Gift exemption

$5 Million

$1 Million

Top Federal Estate Tax Rate

35%

55%

These are the tax changes that have already been put into place. There is still uncertainty w/ social security tax changes in the future. I’m sure there will be a big focus on this in the upcoming election. Stay tuned to find out what promises and changes are set into action.

Stats courtesy of Dulap CPA