Courtesy of Jacques Financial, Rockville, MD

TAX LAW CHANGES

SOCIAL SECURITY
2% additional payroll tax on all wages up-to $113,700.

MEDICARE

  • 3.8% additional tax on all unearned income (dividends, capital gains, rents, royalties, etc.) for earners over $250,000 joint / $200,000 individual.
  • 0.9% additional tax on earned income over $250,000 joint / $200,000 individual.

MARGINAL TAX RATES
Increase from 35% to 39.6% on ordinary income for earners over $450,000 joint / $400,000 individual.

LONG-TERM CAPITAL GAINS AND QUALIFIED DIVIDENDS
Increase from 15% to 20% for earners over $450,000 joint / $400,000 individual. Rate remains at 15% for 25%, 28%, 33%, 35% brackets and 0% for 10% and 15% brackets.

ALTERNATIVE MINIMUM TAX
Permanent fix to automatically adjust exemption amount each year for inflation.

ESTATE TAX
Exclusion set at $5,000,000 (indexed for inflation) with a rate increase from 35% to 40%. Portability of the exclusion and unified gifting remain in place.

EXEMPTIONS
Phase out for earners over $300,000 joint / $250,000 individual. Exemptions phased out by 2% for each $2,500 AGI exceeds threshold amounts.

DEDUCTIONS

  • Phase out for earners over $300,000 joint / $250,000 individual. Deductions phased out by 3% of the amount AGI exceeds threshold amounts up-to a max reduction of 80%. All deductions affected including mortgage interest and charity.
  • Medical costs deductible only to the extent they exceed 10% of AGI up from 7.5% (age 65 and older can use 7.5% until 2016).

HEALTH CARE FLEX SPENDING ACCOUNTS

  • Pre-tax contribution capped at $2,500.
  • Flex spending dollars can no longer be used for over-the-counter medication (except insulin) or for special needs education.

HEALTH SAVINGS ACCOUNTS
Penalty for non-qualified withdrawals increases from 10% to 20%.

MEDICAL DEVICE TAX
2.3% tax on gross sales of medical device manufacturers.

COMPREHENSIVE HEALTH INSURANCE PLANS
40% tax on comprehensive health insurance plans ($10,200 single / $27,500 family).

TAX EXTENDERS
Bonus depreciation. Teacher deduction up-to $250 for classroom expenses. State sales tax deduction if state income tax does not apply. Various education related deductions and credits including the American Opportunity Tax Credit. Child Tax Credit and Earned Income Tax Credit. Direct IRA charitable contributions up-to $100,000 for taxpayers over age 70 ½.

MEN AND WOMEN

IT MAY NOT COME AS A SURPRISE TO LEARN MEN AND WOMEN have different priorities and worries. A recent survey by U.S. Trust found wealthy women – those with $3 million or more in investable assets – have goals similar to those of wealthy men, but they prioritize differently. The survey reported:

"Women create and control an increasing share of wealth and have a powerful economic influence in the workforce and at home – as business owners, executives, investors, philanthropists, consumers, caregivers, and role models for the next generation. They have a distinct perspective and set of behaviors, shaped by their experiences, upbringing, outlook, and goals that uniquely affect their income, financial security, wealth, and wealth planning needs."

For example, when it comes to investing, almost two-thirds of women surveyed think it's important to consider the social, political, and/or environmental effects of the companies in which they invest (42 percent of men share this belief). In fact, more than half are willing to accept a lower investment return if they believe the company in which they're investing has a positive social impact. Close to three-fourths simply don't want to invest in companies that have negative social or environmental influences. On the family front, more than a third of women indicated they devote more time to caring for aging parents and other relatives than do their spouses. In some cases, women said care giving has affected their career advancement and/or income levels; however, relatively few have taken time to calculate the monetary value of the time they've spent providing care.

A 2013 Congressional Budget Office report estimated the economic value of caregiving for older Americans was about $234 billion in 2011. It arrived at its estimate by multiplying $21 per hour (the average wage of a home health aide in 2011) by 11.2 billion hours of donated care. Despite the cost, or perhaps because they don't understand it, the vast majority of survey participants had no formal plans in place to provide for family members who might need support.

When it comes to taxes, a lot of people – male and female – are perplexed. Three-fourths of women are unclear about the effects of tax law changes on investments and income (as compared to 62 percent of men). Regardless of confusion, high net worth investors of both men and women felt pursuing higher returns was more important than letting tax matters determine their investment choices.

 

www.JoeJacquesCPA.com Email:Joe@JoeJacquesCPA.com

Securities offered through Jacques Financial, LLC (JFLLC) Member FINRA/SIPC.
Advisory services are offered through Jacques Advisors, LLC (JALLC) an affiliate of JFLLC.
Joseph W. Jacques is a registered principal of JFLLC.