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The 2001 Bush tax cuts
Old 05-15-2012, 12:50 PM   #1
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The 2001 Bush tax cuts

I have a significant long term capital gain accrued in 2012. Assuming the the 2001 Bush tax cuts expires, what will be my tax liability?
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Old 05-15-2012, 01:04 PM   #2
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This link may help:

EARLY LOOK AT POSSIBLE 2013 INCOME TAX CHANGES « Focus Financial Advisors

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Tax Long Term Capital Gains at 20%
Ever since 2003 long term capital gains tax for assets held longer than 1 year has been 15% for those in the 15% bracket and higher, and 10% for those in the 10% bracket. (Since 2008 taxpayers in the 10% and 15% bracket actually paid no tax on long term capital gains). Under current tax laws, rates are set to revert in 2013 to their pre-2003 levels. This means for all taxpayers in the 15% bracket and below, long term gains would be taxed at 10%. For single taxpayers with taxable income below $200,000, head of households below $225,000 and joint couples below $250,000 your long term rate would remain at 15%. Only filers above these amounts would have a have a 20% long term capital gain rate.
Unless you're single making $200K or married making $250K a year... you'll still have the same old 15% tax on the realized gains when you cash in.

If you're talking about hundreds of thousands in unrealized gains that you want to cash in sometime soon all at once (within the same year) it would be smart to look into doing so prior to the Bush Tax cuts expiring because it'll save you from paying an extra 5% in taxes on a large portion of it.

also worth noting... if you receive large amounts of dividends from these equities and are living on a large income at the moment.

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Tax on Dividends
Another highly watched area of the proposed budget has been what the tax rate will be on qualified dividends. Before 2003, dividends were taxed at your ordinary income tax rate. Since 2003, though, the maximum qualified dividend tax rate has been 15%. (Since 2008, taxpayers in the 15% bracket or below pay no tax on qualified dividends.) When the current law expires in 2013, dividends would revert back to being taxed at your ordinary income tax rate.
President Obama’s budget proposal would keep the current dividend rate of 15% for everyone not considered an upper income taxpayer (single taxpayers with taxable income below $200,000, head of households below $225,000 and joint couples below $250,000). For the upper income taxpayers above these amounts, dividends would be taxed at your ordinary income tax rate of either 36% or 39.6%.
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Old 05-15-2012, 01:10 PM   #3
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The maximum LTCG tax rate should revert back to 20%. If your income exceeds the $200K threshold for single taxpayers or the $250K threshold for married taxpayers, you may also have to pay an extra 3.8% in Medicare taxes, bringing your maximum tax rate up to 23.8%.
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Old 05-15-2012, 01:25 PM   #4
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Thank you!
But if my CG took place in 2012 they won't be effected yes, the increase may start on 1/1/13?
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Old 05-15-2012, 01:51 PM   #5
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The maximum LTCG tax rate should revert back to 20%. If your income exceeds the $200K threshold for single taxpayers or the $250K threshold for married taxpayers, you may also have to pay an extra 3.8% in Medicare taxes, bringing your maximum tax rate up to 23.8%.

I have not looked into this but it seems that paying medicare taxes on capital gains is not correct.... isn't it only on earned income
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Old 05-15-2012, 02:08 PM   #6
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I have not looked into this but it seems that paying medicare taxes on capital gains is not correct.... isn't it only on earned income
See here at KFF Implementation Timeline - Kaiser Health Reform

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Increases the Medicare Part A (hospital insurance) tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and imposes a 3.8% assessment on unearned income for higher-income taxpayers.

Implementation: January 1, 2013
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Old 05-15-2012, 02:38 PM   #7
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Originally Posted by wanaberetiree View Post
Thank you!
But if my CG took place in 2012 they won't be effected yes, the increase may start on 1/1/13?
Correct
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Old 05-15-2012, 04:40 PM   #8
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I had forgot (or never realized) that was in the health care reform law...

I guess the SC decision will impact this part of someone decision....
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Old 05-15-2012, 06:09 PM   #9
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In the interest of confusing you even more..

Depending on the amount of your income and the gain, you may find yourself subject to the AMT. In a certain range deductions are phased out, and the effective capital gains rate (based on an incremental dollar of gain) is 22 or 24%.

Seems when they passed the Bush tax cuts they forgot to consider that
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Old 05-15-2012, 10:22 PM   #10
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I used to be in the deduction phase out all the time. One year I moved from individual stocks to mutual funds and had enough capital gains to leave the phase out zone and get back to the 20% CG rate. I tried to finish all my moves that year to save on taxes.
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