Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

   
Resources - Tax Center - Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York
     
 

Compare the Candidates Tax Positions

Individual Taxes

 
 

On November 6, 2012, Americans will elect the President who will serve for the next four years.  As President of the United States, he will play a major role shaping tax policy and possibly reforming the entire Tax Code. This special briefing, provided by CCH Briefing offers key information for our clients, prospects and referral partners to understand the tax policies of President Barack Obama and Mitt Romney. To make the information easy to understand we have provided only the candidates position on individual taxes in this article. In the future, we will address business tax and other important items.

 

Income Tax Rates

Under current law, the 10, 15, 25, 28, 33, and 35 percent individual income tax rates, originally enacted in 2001 and most recently extended by the 2010 Tax Relief Act, are scheduled to expire after 2012. The 10 percent rate would disappear entirely and the remaining rates would be 15, 28, 31, 36, and 39.6 percent after 2012.

 

Obama

Obama has proposed to continue the Bush-era individual tax rates for all but “higher-income” individuals (which the White House broadly defines as individuals with incomes over $200,000 and families with incomes over $250,000). Under Obama’s proposal, the individual income tax rates after 2012 would be 10, 15, 25, 28, 36, and 39.6 percent. The inflation-adjusted rate brackets associated with the Bush-era rates would also continue, except for adjustment within the new 36 and 39.6 rates to accommodate the $200,000/$250,000 threshold.

 

Romney

Romney has proposed to extend permanently the current individual income tax rates of 10, 15, 25, 28, 33, and 35 percent.

 

Impact

Effective January 1, 2013, two new Medicare taxes kick-in for higher-income individuals (generally individuals with incomes over $200,000 and families with incomes over $250,000). The Patient Protection and Affordable Care Act (PPACA) imposes a 0.9 percent additional Medicare tax and a 3.8 percent Medicare contribution tax. Although Romney has vowed to repeal the PPACA, undoing these two taxes quickly enough to apply to 2013 will prove challenging.

 

Capital Gains/Losses

Under current law, qualified capital gains and dividends are taxed at zero percent for taxpayers in the 10 percent and 15 percent brackets and at 15 percent for all other taxpayers. This investor-friendly treatment, originally enacted in 2003 and extended in the 2010 Tax Relief Act, is scheduled to expire after 2012.

 

Romney

Romney has proposed to make permanent all of the Bush-era tax cuts, including the reduced tax rates on qualified dividends and capital gains. Romney has also discussed exempting from tax all capital gains, dividends and interest for individuals making less than $200,000 a year.


Obama

Obama has proposed to tax dividends as ordinary income for higher-income individuals (taxpayers in the proposed 36 percent and 39.6 percent tax brackets) after 2012. Capital gains would be taxed at a 20 percent rate after 2012 for individuals with incomes over $200,000 and families with incomes over $250,000.

 

IMPACT

Certain large capital-gains transactions, as well as plans for special dividends, have reportedly already been set into motion for completion by year-end 2012. These taxpayers see the risk as too high to defer dividends and capital gains recognition into 2013 or later. Many other investors are still on the sidelines, waiting to either sell or hold depending upon the results of the elections. The 3.8 percent Medicare tax in addition to the capital gains rate is also being factored into plans to sell before 2013. Some observers are lobbying for a $1 million minimum on application of the 20 percent rate, fearing a precipitous stock market selloff while the economy remains fragile.

 

Marriage Penalty Relief

The 2010 Tax Relief Act extended marriage penalty relief for married couples filing jointly (an increase in the standard deduction and the 15 percent tax rate brackets to twice the amount applicable to single individuals) through 2012.

 

Romney

Romney has proposed to extend all of the Bush-era tax cuts, including marriage penalty relief.

 

Obama

Obama has proposed to extend the Bush-era tax cuts, including marriage penalty relief, for individuals, with the exception of a rate increase for single taxpayers with incomes at or above $200,000 and joint filers with incomes of $250,000 or more.

 

Child Care Tax Credit

Under current law, the $1,000 child tax credit, originally enacted in 2001 and most recently extended by the 2010 Tax Relief Act, is scheduled to expire after 2012.

 

Obama

Obama has proposed to make permanent the $1,000 child tax credit.

 

Romney

Romney has proposed to make permanent the $1,000 child tax credit.

 

Adoption Credit
The Bush-era tax cuts enhanced the adoption credit and the 2010 Tax Relief Act extended these enhancements through 2012.

 

Romney

Romney has proposed to extend the Bush-era tax cuts, including the enhanced adoption credit.

 

Obama

Obama has proposed to extend the enhanced adoption credit.

 

COMMENT
The Patient Protection and Affordable Care Act (PPACA) made additional enhancements to the adoption credit, which expired after 2011. Obama has not proposed to extend these enhancements and Romney has proposed to repeal the PPACA.

 

Payroll Tax Holiday

After December 31, 2012, the current payroll tax holiday is scheduled to expire. The employee-share of OASDI taxes is scheduled to increase from 4.2 percent (in effect for calendar year 2012) to 6.2 percent (the employer share remains 6.2 percent).

 

Obama

Obama has not addressed the payroll tax holiday.

 

Romney

Romney has not addressed the payroll tax holiday.

 

IMPACT

The two-percentage point reduction in OASDI taxes provided $2,201 in savings up to the Social Security wage base of $110,100 for 2012. The Administration reported that the average worker would increase take-home pay by about $1,000 as the result of the 2012 extension. Sunsetting of the payroll tax holiday, similar to sunsetting of the Bush-era tax cuts, would effectively create a “tax increase” in 2013.

 

American Opportunity Tax Credit

The American Recovery and Reinvestment Act of 2009 enhanced and renamed the Hope education credit as the American Opportunity Tax Credit (AOTC). The 2010 Tax Relief Act extended the AOTC through 2012. After 2012, the Hope credit, with its lower benefits would return.

 

Romney

Romney has not addressed the AOTC.

 

Obama

Obama has proposed to make permanent the AOTC.

 

Comment

The AOTC reaches up to $2,500 of the cost of tuition, fees and course materials paid during the tax year. The AOTC is based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, with adjusted gross income phase-outs starting at $80,000 for singles and $160,000 for joint filers. The Hope credit was limited to the first two years of post-secondary education. The AOTC may be claimed for all four years of post-secondary education.

 

Higher Education Tuition Deduction

The above-the-line deduction for higher education tuition and related expenses expired after 2011. The maximum deduction was $4,000 for those with AGI up to $65,000 ($130,000 for joint filers) and $2,000 for those with AGI up to $80,000 ($160,000 for joint filers).

 

Obama

Obama has proposed to extend the higher education tuition deduction.

 

Romney

Romney has not addressed the higher education tuition deduction.

 

Federal Estate & Gift Tax

The 2010 Tax Relief Act set the maximum federal estate and gift tax rate at 35 percent for decedents dying in calendar years 2011 and 2012 with a $5 million exemption ($5.12 million adjusted for inflation for 2012). For 2011 and 2012, the estate of a surviving spouse may also be able to use the unused portion of the deceased spouse’s estate tax exclusion (“portability”).

 

Obama

Obama has proposed to set the maximum estate tax rate at 45 percent for decedents dying after December 31, 2012 with a $3.5 million exemption amount. Obama has also proposed to extend the current rules for portability. The separate gift tax exclusion would return to its 2009 level of $1 million under Obama’s proposal.

 

Romney

Romney has proposed to abolish the federal estate and gift tax.

 

IMPACT

Absent Congressional action, the maximum estate and gift tax rate in 2013 is scheduled to be 55 percent, with a 5-percent surcharge applying to large estates in excess of $10 million. The exemption amount is scheduled to be $1 million. High net-worth taxpayers may want to maximize gifts with the certainty of the $5.12 million exclusion before the close of year-end 2012.

 

Contact Us

Do you have specific questions about the candidates’ individual tax positions? Wondering if you should change your tax planning approach for the balance of 2012? If so, then contact us today! For additional information, please contact Yasar Bokhari, CPA, at 516-248- 7361, or click here to email Yasar.  In a brief consultation he can address your situation and determine the best way to proceed.

 

**Please note the information provided above is accurate as of September 20, 2012. Any changes made to either candidates position after this date are not reflected in this article.


Source:
CCH Briefing

 
 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York

 

Boris Benic and Associates LLP - Certified Public Accountants and Consultants - Garden City, Long Island, New York