The Tax Planning Countdown to 2013 Starts Now!

As we begin 2012, all real estate investors need to pay very close attention to the ever changing tax landscape. Particular attention needs to be paid to the significant tax increases slated to occur in 2013.

Investors considering whether or not to sell and pay their taxes, or sell and 1031 Exchange, must consider the year-over-year tax implications. Real estate investors will have a much greater tax burden in 2013 than in 2012.

Tax Rate Changes for
2012 and 2013

2012

2013
Ordinary income
35%

39.6%
Qualified Dividends
15%

39.6%
Capital Gains Tax
15%

20%
State of Oregon
9.9%

9.9%
Courtesy of Delap CPA, Lake Oswego, Oregon

Medicare Tax

Beginning January 1, 2013 a new Medicare tax of 3.8% will be applied to investment income of those investors with a modified adjusted gross income of over $200,000 ($250,000 for couples filing jointly). The tax applies to the lesser of the (1) total investment income for the year, and (2) the amount by which the individual's total income exceeds the threshold. For example a single individual taxpayer who has $150,000 of investment income and $125,000 of other income will pay the new Medicare tax on $75,000(the amount by which the individuals' income exceeds the $200,000 threshold. Because the threshold amounts for the new Medicare tax are not indexed for inflation, more taxpayers will be subject to the new Medicare Tax over time.

(courtesy of Jenee" Hilliard ,Attorney at Law , Miller Nash)

Gifting 2012
2013
Lifetime Gift exemption $5 Million
$1 Million
Top Federal Estate Tax Rate 35%
55%
Annual Gift exclusion $13,000
$13,000
Courtesy Delap CPA, Lake Oswego, Oregon

More details for those investors that have employees on-site at their properties:

1. Minimum Wages have increased in Oregon and Washington:

As of 1 January 2012 the Minimum wage has increased to:

~ Oregon to $8.80 an Hour
~ Washington $9.04 an Hour

Note: Continued uncertainty regarding social security taxes: Even though the President and Congress have extended the social security tax reductions for 2 more months there is no guarantee that they will be continued through next year 2012. Under the compromise late in 2010 that extended the tax cuts by President George W. Bush, employees in 2011 are paying Social Security at a reduced rate of 4.2 percent. President Obama would like to lower the 2012 Social Security tax rate for both employers and employees to 3.1 percent. But if Congress does not take action in two months, the Social Security tax rate in 2012 reverts to the usual 6.2 percent for both employers and employees.

See: Taxes are going up ... no matter what party you support

Written by Clifford A. Hockley for www.RealtyTimes.com Copyright © 2011 Realty Times All Rights Reserved.