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Highlights of Recent Tax Legislation—And Strategies to Minimize Tax Owed  

Author:  James G. S. Yang.; Leonard J. Lauricella.

Source: Volume 31, Number 03, Spring 2014 , pp.21-42(22)

Journal of Taxation of Investments

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Three important pieces of legislation have been enacted since 2010 that will have a significant impact on high-income taxpayers beginning in 2013 and continuing forward. This article analyzes the provisions that will have the most impact immediately. The new laws raise the highest income tax rate to 39.6 percent on most income and the top rate on dividends and long-term capital gains to 20 percent; increase the employee share of the Medicare tax to 2.35 percent and increase the medical expense deduction floor to 10 percent; and reinstate the phase-out of total itemized deductions and personal exemptions. A new 3.8 percent tax is imposed on unearned income and a 2.3 percent excise tax is levied on the sale of medical devices. Penalties are also imposed on those who do not have health insurance. This article scrutinizes some key details and offers a number of tax planning strategies that can be used to alleviate the tax burden.

Keywords: qualified dividends; long-term capital gains; adjusted gross income; itemized deductions; personal and dependency exemptions; Medicare tax; net investment income tax; unearned income; active income; passive activities income; Obamacare

Affiliations:  1: Montclair State University; 2: Montclair State University.

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