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2013 Key Tax Proposals

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On February 13, President Obama's Fiscal Year 2013 budget was released. Follow this link to get a full copy of the 2013 Budget. The Treasury's Green Book containing general explanations of the Administration's revenue proposals can be found here.

Robert Keebler, a leading professional in the area of tax and estate planning, highlighted some of the key proposals potentially affecting taxpayers below:
  • Extend Bush tax cuts for all but the top two brackets. The only change would be to have the 33% and 35% rates go back to their pre-2001 levels of 36% and 39.6%. Taxpayers in the top two marginal brackets would still benefit from reduced rates on the portion of their income taxed in the lower brackets.
  • Raise the long-term capital gains rate to 20% for single taxpayers making more than $200,000 per year, $250,000 for married taxpayers filing jointly and $125,000 for married taxpayers filing separately.
  • Tax rate on qualified dividends would revert to ordinary income tax rates (up to 39.6%) for the same taxpayers. For everyone else, the rate would stay at 15% (or 0%)
  • Tax carried interest as ordinary income.
  • Reduce value of itemized deductions for taxpayers in the 33 and 35% brackets to 28% (33% bracket current starts at $178,650 for single taxpayers and $217,450 for married filing jointly.
  • Reinstate the personal exemption phase-out for upper income taxpayers
  • Extend reduction of social security tax on self-employed from 14.2% to 12.2% for the rest of 2012.
  • Enact a permanent AMT Patch.
  • Make the HOPE tax credit permanent. The credit is worth up to $2,500 per year.
  • Make recent expansions of the low-income tax credit permanent.
  • Restore the estate, gift and GST tax to 2009 rates.
  • Require a minimum term for GRATs of ten years.
  • Limit the duration of GST tax exemption to 90 years.
It is highly unlikely--approaching a 0% change--that tax reform will be taken up during the 2012 election year. If nothing is done, the Bush tax cuts will sunset to Clinton-era rates. Perhaps Congress will extend current rates for another year and take up reform in 2013.

Stay tuned...

Kevin Kroskey
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