As 2013 comes to a close, take another look at ATRA:

The year 2013 was just a few hours old when the U.S. Congress passed, and President Barack Obama signed into law, the American Taxpayer Relief Act (ATRA). As 2014 nears, it’s time to take another look at ATRA to see what tax advantages that will disappear with the New Year. Let’s get started:

  • The lower Bush-era income tax rates were extended for most taxpayers, except for tax filers with incomes greater than $400,000 ($425,000 for heads of households, and $450,000 for married filing jointly taxpayers). In addition, their top marginal tax rate was set at 39.6 %. The tax rate on capital gains and qualifying dividends for individuals in this tax bracket was increased to 20%
  • U.S.C. Sec. 41 tax credits for research and development were extended.
  • The estate tax rate for estates of more than $5 million (indexed for inflation) moved to 40%.
  • Individual Alternative Minimum Tax exemptions increased to $56,600 for unmarried filers and $78,750 for married couples filing jointly (in 2013 these exemptions began being indexed for inflation and nonrefundable personal credits were permitted against the AMT).
  • There are no delays or reductions on Patient Protection and Affordable Care Act (Obamacare) taxes on earned or unearned income
  • Capital Gains: investors in the lowest tax brackets ($35,350 for a single filer; $47,350 for a head of household; and $70,700 for a married couple filing a joint return), can sell long-term assets and avoid paying capital gains taxes altogether. Furthermore, taxpayers above the 20% range might consider transferring assets to their children or others in their family in the lowest two income tax brackets. They can then sell the assets and pay no capital gains taxes. Caution: There may be other taxes (Gift , Kiddie Tax, etc.) that apply, so you may not be able to escape all taxes.

Tax planning in light of ATRA, Obamacare, and other legislation suggest that you see a tax accounting professional if you don’t want to pay more taxes than you must. You can find a Rodefer Moss professional in your area by clicking here.

As you consider the above, reach out to your tax professional to understand the changes brought on by ATRA, how they will affect you, and what you can do about it today. Otherwise, Uncle Sam may be smiling when he sees you coming.


Tagged Accounting, American Taxpayer Relief Act, ATRA, Taxes, Year End Planning