Friday, October 26, 2012



The Law Offices of James A. Busse Jr.
Long Beach CA, Carson City NV.
September 2012

Planning ................
Taxes and more Taxes
TAX. That is the word. The Obama health care act is the largest tax increase in real dollars and as a percentage since the implementation of income, estate, sales and excise Tax in the history of the United States. The embedded taxes in your health care insurance already comprise twenty additional percent since 2010. This newsletter, so long in coming, will highlight the tax consequences of the Obamacare which for those single divorced or widowed with health care or who make over $44,000 per year, adds nothing but tax, (no roads, no bridges, no military, no nothing) and for those making less than $44,000 per year (married filing jointly $88K) funds some or all of their their health care insurance, deductibles, and co pays even if they pay no tax at all.. i.e. If you make $42K per year now, don't take the raise or look for better employment unless the offer is over $60K per year. You need that just to break even with the increased tax and loss of benefits . Under Obamacare it pays to be poor.


Here are the Bush cuts that come back in 2013: FYI The 2001 Bush cuts simply rolled back the Clinton tax increases.


CAPITAL GAINS/DIVIDENDS: The highest capital gain tax in the world starts at 36% and is not adjusted for earnings. So if you are living off your investments in retirement expect a 100% increase in your income tax.


DEDUCTIONS: If you earn more than $84K you lose part of your house deduction and it is entirely gone if you earn more than $150K per year.

CHILD TAX CREDIT: The $1,000 per child credit ends.

ADOPTION CREDIT: Adoption credit ends.

EMPLOYER PROVIDED CHILD CARE: Employer credit reduced.

EDUCATION: Can't deduct interest on student loan if you get a good private sector job. Deductions and credits will still available for those who choose to work for the government.

AMT: AMT will effect most people who earn income from investments.

SOCIAL SECURITY TAX: The 6.4% reduction ends

FEDERAL ESTATE TAX: Back to estate pays about 46% tax on the value over $1,000,000.

NEW OBAMACARE TAXES

-A 3.8% surtax on "investment income" when your adjusted gross income is more than $200,000 ($250,000 for joint-filers). Rents, dividends, interest, capital gains, annuities, house sales, partnerships, etc. Taxes on dividends will rise from 15% to 18.8%--if Congress extends the Bush tax cuts. If Congress does not extend the Bush tax cuts, taxes on dividends will rise from 15% to 43.8%. (WSJ)

-A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint).

-Increased medicare tax Now 2.9% split between you and your employer. 2013 4.7% total. (WSJ)

-Flexible Spending Account contributions will be capped at $2,500. Currently, there is no real limit on how much you can set aside to pay for medical expenses. (ATR.org)

-The itemized-deduction hurdle for medical expenses goes from $7,500 to $10,000.

-The penalty on non-medical withdrawals from HSA's is now 20%. That's twice the penalty that applies to annuities, IRAs, and other tax-deferred vehicles. (ATR.org)

-The federal tax of 10% on indoor tanning services continues (since 2010). (ATR.org)

- Starting in 2018.Those whose employers pay for all or most of employee healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays. Total not just the amount over. (ATR.org)

-A"Medicine Cabinet Tax" that eliminates the ability to pay for OTC medicines from a pre-tax Flexible Spending Account. This started in January 2011. (ATR.org)

A tax on medical devices costing more than $100.Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures. (Breitbart.com)

Even though the 3.8% investment income hike and the Medicare tax increase--only hit you if you're income exceeds $200,000 a year. The rest hit you no matter how much you're making. Of course, if you sell the house you purchased for $50,000 in 78 for $320,000 you made more than $200K, didn't you? (Replacement cost is immaterial.)

Here's How Much The Obamacare Penalty Tax will cost if you choose not to buy insurance and if your income from all sources is over $44K per person before deductions. Keep in mind you still don't get healthcare you get nothing for this. And, although the insurance companies can not deny you coverage for pre-existing conditions they can charge pretty much what they want or not offer insurance at all. So you still may be out of luck if you don't have insurance, pay the penalty, and try and buy after you are either injured or fall prey to a nasty illness. Of course, if you make less than $44K the government gives you a tax credit (even if you pay no taxes you get a check) to pay for the insurance, co-pays and deductibles. Obamacare taxes those who work for a living to pay the healthcare insurance for those who don't, and at the same time it lowers the quality of healthcare, increases time to get procedures done, starts the destruction of medicare, and bans those who want to work outside Obamacare from doing so, at least in the USA. In short , it turns our healthcare system into a third world system while costing USA prices and for most a 20% tax increase.. Those of you who might remember Nixon's wage and price control understand the parallels. They too did nothing for the people. They only increased the size of government and caused higher prices for the same things. The obvious strategy is to not pay, if you get sick enough, quit your job, go on welfare and let the remaining workers pick up the tab.

The penalty is based on income from all sources:
Less than $9,500 income = $0
$9,500 - $37,000 income = $695
$50,000 income = $1,000
$75,000 income = $1,600
$100,000 income = $2,250
$125,000 income = $2,900
$150,000 income = $3,500
$175,000 income = $4,100
$200,000 income = $4,700
Over $200,000 = The cost of a "bronze" health-insurance plan, about $19K.
The IRS will collect the penalty-tax,
The IRS will not have the power to charge you criminally or seize your assets if you refuse to pay. The IRS will only have the ability to sue you. And the most the IRS can collect from you if it wins the suit is 2X the amount you owe plus the standard penalty and interest which I think is about 10--16% per year.
-Employees whose employers only offer plans that cost the employee more than 8% of the employee's income, Indians, and certain non SSI religions are exempt from the penalty.

Jim Busse

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