Obama’s New Healthcare invoice – Implications For traders

OBAMA’S HEALTHCARE REFORM just handed: investment AND TAX IMPLICATIONSPresident Obama’s newly passed healthcare reform bundle will result in better taxes for people making extra than $200,000 and couples incomes extra than $250,000. happily, these new tax legal guidelines do not kick in until 2013.MEDICARE PAYROLL TAX HIKEThe modern-day Medicare payroll tax is 2.9% of all wages, with the worker and the agency each paying half of. starting in 2013, excessive income employees can pay an extra.9% of earnings above $two hundred,000 for individuals and over $250,000 for couples. those extra tax and earnings limits apply to wage income most effective. for that reason, a couple making $500,000 in salary profits would pay a further $2,250 in Medicare taxes in 2013. a couple making $1 million might pay a further $6,750 in taxes.NEW MEDICARE TAX ON funding INCOMEHigh income households may also be subject to a new three.eight% tax on funding income starting in 2013. this is applicable to capital profits, dividends, hobby, annuities, and so on. This tax will follow to human beings with total income (wages plus funding income) in extra of $2 hundred,000 for individuals and $250,000 for couples. This new three.eight% tax applies to whichever is less-your general investment income or the excess of your modifi ed adjusted gross income (AGI) over the high-income limit of $200,000 or $250,000. consequently, if a couple has total income of $300,000 and investment earnings of $100,000, they would simplest owe the 3.eight% tax on $50,000 (their overall income of $300,000 less the high profits threshold of $250,000). Tax exempt funding earnings (such as municipal bonds) is not issue to this new tax!blended impact OF both NEW TAXESAdding both of those new taxes together, a couple with salary earnings of $500,000 and funding profits of $a hundred,000 would owe a further $6,050 in Medicare taxes in 2013. a couple with salary profits of $1 million and funding earnings of $2 hundred,000 could owe a further $14,350 in Medicare taxes.every other CAPITAL profits AND DIVIDEND TAX rate HIKE COMING IN 2011Independent of those new Medicare tax hikes, the tax rates on dividends and capital profits are likely to go up from the cutting-edge low 15% degree to 20% (or better) next yr. If Congress does not anything, the Bush tax cuts will expire and those tax charges will mechanically pass up. accordingly, blended with the new extra three.8% Medicare tax on funding earnings (including capital gains) in 2013 approach taxes on investment income are defi nitely going up over the next numerous years. based totally on the quote above and the experience in Massachusetts, this could be just the begin of new higher taxes on “the rich.”investment IMPLICATIONS AND techniques FOR traders• for the reason that new Medicare tax on investment income does now not practice to tax-exempt income, that is a advantageous for investing in tax-free municipal bonds relative to regular taxable bonds. Muni bonds are greater appealing going ahead.• this is some other reminder to try to control your said earnings to beneath $200,000 for individuals and $250,000 for couples, if you could. there are numerous methods to control your mentioned profits down: saving extra in tax-deferred automobiles along with 401K plans, profi t sharing plans, SEP’s, deferred reimbursement plans, making an investment in muni bonds, offsetting capital profits with capital losses, and investing in stocks that pay very little dividends. making an investment for capital appreciation can be taxed much less than making an investment for contemporary earnings.• The growing tax fees on investment profits make strategies round tax area even greater crucial. clever tax vicinity method putting your tax ineffi cient investments (like bonds) in your tax deferred bills and your tax effi cient belongings (like boom equities) in taxable debts.• if you have investments with massive capital profits (your business, real estate, securities, etc.) that you are thinking about promoting quickly besides, you may want to keep in mind selling them now (or part of them) on the current low 15% capital profits rate. Tax prices are going up.