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Here is a continuation of my article on TAXMAGEDDON and how it will affect all Americans in 2013. Part 1 is HERE
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns during the 2013 tax season (January through April), they'll be in for a nasty surprise—the AMT won't be held harmless, and many tax relief provisions will have expired. These tax increases will be in force for BOTH 2012 and 2013. The major items include:
- The AMT will ensnare over 31 million families, up from 4 million last year. According to the Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 31 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
No matter which political party you support this election as it stands now everyone who works will be hit with a huge tax increase come January 1, 2013. The rich will pay more taxes but so will everyone pay more taxes. Those who are married and have families will see their tax dollars increase because the "marriage penalty" will return on January 1, 2013. Those who have dependent children under the age of 17 will see their taxes increase because the child tax credit will be chopped in half – from $1,000 per child to $500.
Capital gains tax will rise to 23.8 percent from 15 percent so your $100 in dividends just cost you another $8.80 in federal taxes. If you happen to be a parent or guardian of a special needs child, consider yourself capped. Your unlimited FSAs are now limited to $2,500. If part of that means high medical expenses, you've been allowed to deduct expenses that exceed 7.5 percent of your adjusted gross income (AGI). In 2013 your new threshold will be 10 percent of AGI.
Self Directed IRAs
Investing IRA funds in real estate used to be quite complicated, time-consuming, and expensive. Deals had to be administered by IRA custodians every step of the way, complicating the process, and fees had to be paid to the custodian every time the IRA made a move. Although, much of this is still true with many traditionally IRAs, investors can avoid a lot of unnecessary and costly steps by using a self-directed IRA.
A self-directed IRA is simply an IRA in which the IRA owner is able to make investment decisions without having to get the custodian's approval. The favorite instrument for opening a self-directed IRA is the Limited Liability Company, which allows the IRA owner to have absolute checkbook control over his or her IRA. This means every time you have to pay an expense associated with an IRA asset, you can write the check yourself and avoid custodian fees.
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