JAAG Financial Services:Jamie Gibson, EAEnrolled to Practice Before the Internal Revenue Service
Sign up for our newsletter and receive the latest tax updates and due date reminders.
Welcome to JAAG Financial Services
Jamie Gibson, EA endeavors to provide his clients with the very best professional services possible. This website was designed to enhance those services by providing online answers to many of your everyday financial dealings and frequently asked questions.
Client Brochures, Tax Planning Guides and much more...
California Prop 30: How will it affect you
So many of you have called about the November 6, 2012 passage of California Proposition 30, and you’re asking the same question: how will it affect me? In a nutshell, it contains two tax provisions, and you may be affected by both provisions or only one of them.
The tax provision that affects each of us is the ¼% increase in sales and use tax that goes into effect January 1, 2013. If your county’s tax rate is 7.25%, it will be 7.5% beginning in 2013. The sales and use tax rate is legislated to remain law for four years.
The other provision that is legislated to remain law for seven years is retroactive to January 1, 2012, and adds three additional tax rates for higher income taxpayers: 1) a 10.3% marginal tax rate on taxable income over $250,000 but less than $300,000 if you file as single, $500,000 but less than $600,000 if file as married, and $340,000 but less than $408,000 if you file as head of household; 2) a 11.3% marginal tax rate on taxable income over $300,000 but less than $500,000 if you file as single, $600,000 but less than $1,000,000 if file as married, and $408,000 but less than $680,000 if you file as head of household; 3) a 12.3% marginal tax rate on taxable income over $500,000 if you file as single, $1,000,000 if file as married, and $680,000 if you file as head of household. Of course, prior California law already adds a 1% Mental Health Tax to any taxpayer with taxable income over $1,000,000.If you are a high income taxpayer, know that the proposition also contains a waiver so that an underpayment of taxes penalty will not affect you as long as your other taxes were deposited on time and in the correct amounts. This is a lot of information, and if you have any questions, please let me know.
Obama's Health Care Act
The U.S. Supreme Court ruled on June 28, 2012, that President Obama’s Health Care Act is constitutional and that the government can and will require individuals to purchase health insurance. This provision takes effect January 1, 2014, and there are other provisions that phase in January 1, 2013.
There are three additional and potentially expensive provisions to this law that take effect in 2013:
1.If you are single and your compensation (salary, wages, self-employment income) is $200,000 or more ($250,000 for married couples), you will pay an additional 0.9% tax on your earned income. What can you do about this? Consider accelerating a bonus or other income that is scheduled to be paid to you in 2013 by rescheduling it to be paid in 2012.
2.There is a 3.8% tax on investment income (interest, dividends, net rental income, capital gains, etc.) for individuals, estates, and trusts. The tax is 3.8% of the lesser of your investment income or your adjusted gross income that is over the threshold amounts of $200,000 for singles and $250,000 for married couples. For estates and trusts, the tax is 3.8% of undistributed net investment income or the excess of AGI over the dollar amount at which the highest estate and trust income tax bracket begins. For 2012, that estate/trust bracket begins at $11,650. What can you do about this provision? Consider accelerating this type of income from 2013 to 2012. If you are managing an estate or trust, consider distributing net investment income to the beneficiary(s) each year.
3.You probably recall that if you itemize your deductions, you can deduct any medical expenses that exceed 7.5% of your adjusted gross income. This changes with the Health Care Act because the medical deduction threshold will increase from the current 7.5% of your adjusted gross income to 10% for taxpayers under the age of 65. In 2017 it will be 10% for all taxpayers regardless of age. To avoid the increased AGI threshold, try to lump the payment of medical expenses into 2012 instead of paying them in 2013.I’m reviewing client files to identify individuals that may be affected by these changes, but I may not be aware of your entire financial picture. If what I describe here may affect you, please let me know so that we can do some early planning to mitigate some of the expensive consequences of the law.