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Beware of the 3.8% Medicare Surtax for Estates and Trusts

Ever since the United States Supreme Court upheld the Affordable Care Act, most of the focus has been on how this increased tax effects individual taxpayers. As determined by this decision, individual taxpayers with modified adjusted gross income over $200,000 (or $250,000 for married taxpayers) are subject to an increased 3.8% Medicare surtax on certain investment income beginning in 2013.

Little focus has been given on how this increased Medicare surtax will increase tax liabilities for trusts and estates. Income in an irrevocable trust is either taxed to the trust or to the trust beneficiaries. If income in the trust or estate is accumulated at the trust or estate level, then the trust or estate pays the income tax. If the income is distributed to the beneficiaries, however, the trust receives an income tax deduction for the amount of the distributable net income (DNI) and the beneficiaries report the taxable income.

In the case of a trust or estate, the 3.8% Medicare surcharge is imposed on the lesser of either undistributed net investment income or the excess of adjusted gross income over the highest estate or trust income tax bracket. For 2013, the highest trust income tax bracket begins at $11,950, […]

By Linkenheimer LLP|2020-09-03T20:05:51+00:00June 3rd, 2013|3.8, affordable care act, carli ortiz, CPA, estate, Linkenheimer, medicare, Santa Rosa, surtax, tax, taxable income, trust|0 Comments

Tax Time: What You Need to Know

Every year the tax codes change and last year was no different. The real questions, as we close in on April 15th, are: What are the significant changes that will have an effect on how I prepare my returns for 2012; and, what planning should I be doing now for the current calendar year.

The biggest news, which we’re hoping our clients have heard about at this point, is the passage of the American Taxpayer Relief Act at the beginning of this year. In addition to changing how the Alternative Minimum Tax is calculated on 2012 taxes, it retained the status quo for a number of temporary tax breaks, extending some retroactively and others into the 2013 tax year. Marginal tax brackets also rose a bit, so even if you made a couple thousand dollars more last year, you’ll probably owe the same percentage as you did last year.

Deductions for 2012
The standard deduction for those who don’t itemize rose by $150 for single filers and $300 for joint filers — to $5,950 if you’re filing solo and $11,900 if you’re filing with your spouse. And the amount you get to deduct for both you and your dependents […]

By Linkenheimer LLP|2020-09-03T20:05:52+00:00March 27th, 2013|adoption credit, alternative minimum tax, american, amt, CPA, deduction, Linkenheimer, Santa Rosa, tax, tax codes, tax time, taxpayer relief act|1 Comment

Here is a list of 10 deductions individual taxpayers may overlook

Now that all the 2011 tax deadlines have passed, it is a perfect time to start planning for the next tax season.

Here is a list of 10 deductions individual taxpayers may overlook provided by Bankrate.com:

Additional charitable gifts – everyone knows the donation itself is a deduction, but did you know certain expenses are deductible as well? For example, you could be reimbursed charitable miles at $0.14 per mile, the cost of any supplies bought for the group, and if a uniform is required, you could deduct the cost of that uniform and its cleaning bills.
Moving expenses – there are many moving expenses you can deduct when you relocate. For example, even your first relocation after college to start a new job is deductible.
Job hunting costs – costs related to searching for a new job in your current profession can be […]