Baltimore, Maryland (PRWEB) January 08, 2013
At the last hour, the House passed a bill averting the impending fiscal cliff that includes a number of elements that will affect business owners and individual taxpayers at all income brackets. Glass Jacobson CPA and Wealth Management firm in Baltimore is advising Maryland and DC business owners to address new planning opportunities made available by the fiscal cliff compromise.
The fiscal cliff compromise permanently extends the Bush tax cuts for all but the wealthiest Americans, individuals earning more than $400,000 and married couples earning more than $450,000. For these taxpayers, rates increase from 35% to 39.6%. This is in addition to the .9% additional tax on ordinary income from the healthcare bill. This is good news for middle class America, but given that the majority of small and midsized businesses are set up as pass through entities, these business owners will feel the impact of an increase of taxes on ordinary income. Corporate tax rates, left untouched by this deal, do not affect LLCs and S Corporations.
Congress also agreed to raise capital gains taxes from 15% to 20%. Taxes on dividends will also increase to 20%. This is actually good news for investors, who initially feared an increase on dividends to over 43%.
These tax increases will result in an additional $620 billion in new revenue over 10 years. President Obama had initially hoped to raise $1.6 trillion.
For business owners, there are new planning opportunities available. The new bill also permanently extends the $5 million estate and gift tax extension. Steve Albert, Tax Partner at Glass Jacobson, says “this is good news for family-owned businesses thinking about succession planning and exit strategies.”
Mr. Albert also points out that “a permanent fix of the Alternative Minimum Tax (AMT) will allow small and mid-sized business owners to take advantage of additional tax credits and deductions. These taxpayers were previously handcuffed by the AMT and unable to use these tools in their planning strategy. I am setting up meetings with all my business clients now to determine what we might be missing.”
There were several other pieces of good news for America taxpayers, including an extension of the child care tax credit and the college tuition credit for five years and an extension of the farm bill for one year, re-stabilizing the price of dairy items.
Now for the bad news. All Americans can expect to see a little less in the take home pay now. Congress will allow the payroll tax holiday to expire, meaning a 2% hike in payroll tax. For an individual earning $50,000/year, this comes out to about $1000 less per year. The agreement says little in terms of deficit and debt reduction, a sticking point for republicans, and only postpones the massive budget cuts, known as sequestration, until March 3rd, effectively setting up another showdown 2 months from now.
Founded in Baltimore in 1962 as a traditional CPA firm, Glass Jacobson has evolved into a wealth management firm to better serve its clients’ diverse, ever-growing financial needs. Today, the firm’s unique Wealth Management Model brings together the essential services of Investment Management, Advanced Planning and tax and accounting, and delivers them with unparalleled expertise and professionalism. Serving as a personal and business advisor, Glass Jacobson looks beyond the numbers to get to the core of every client’s financial situation. The firm delivers a full team of in-house CPAs, investment advisors, financial planners and insurance specialists to every client. Keep up to date with Maryland Tax Changes throughout the year.
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