Income Tax Considerations for Individuals – Part 4 of 4

My prior few blogs spoke about some of the big changes taxpayers will be facing as they file their 2013 tax returns.  Among them are increased ordinary tax rates, increased capital gain rates, the new 3.8% Medicare Contribution Tax, the phase-out of personal exemptions and reduction of itemized deductions, etc.  What does this look like when we combine all the changes?  The following example compares the tax increase on the exact same taxable income of a family between 2012 and 2013.


 Example:  Married Filing Joint  

INCOME  2012  2013 
Wages $500,000 $500,000
Non-Qualified Stock Options $100,000 $100,000
Interest Income $25,000 $25,000
Qualified Dividends $50,000 $50,000
Short-Term Capital Gains $40,000 $40,000
Long-Term Capital Gains $100,000 $100,000
Adjusted Gross Income $815,000 $815,000       A 
Less Itemized Deductions -$98,000 -$82,550        B 
Less Exemptions -$19,000 $0                  C 
Taxable Income $698,000 $732.450



A Adjusted Gross Income remains the same
B Higher-income families will see a reduction in their itemized deductions
C Higher-income families will also see a reduction or full loss of their personal exemption


Please click here to view our Year-End Tax Planning series. 

Barbara Taibi is a Partner in the Personal Wealth Advisors Group with years of public accounting and income tax planning and tax return preparation experience. Barbara focuses on helping clients plan for and meet their financial and tax goals.

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