The Obama Tax Increases

Here’s a partial enumeration of the taxes which President Barack Obama is willing to blow up our economy in order to get.

Income tax: Across the board.  Top rate rises to 39.6% from current 35%, bottom 15% rate disappears.  Obama claims to be interested only in the top rates, but his evident lack of seriousness in his proposals counters this claim.  See the table below

Self-employment tax:  Rise from 2.9% to 3.8%.

Exemption Phase-Out: Otherwise allowable exemption amounts will be reduced by 2% for each $2,500 or part of $2,500 ($1,250 for married filing separately) that the taxpayer’s AGI exceeds the AGI threshold for the year based on the taxpayer’s filing status.

Itemized Deduction Phase-Out: Resumed income-based phase-out of these deductions: taxes, interest (except investment interest), charitable contributions, employee job expenses and other miscellaneous itemized deductions, etc.  Additionally, and independent of income (in the sense of a phase-out), the threshold for deductibility of medically related items rises from 7.5% to 10% of AGI.

Long-Term Capital Gains Rates Increase: See the table below

Coverdell Education Accounts: Dollar limit on contributions for any one beneficiary is reduced to $500 from $2,000, contributions can be made only by individuals; the income phase-out range for the annual contribution limit rises from twice the amounts for single filers to a hard $150,000-$160,000 for joint filers instead of simply; contributions for special needs students age 18 or over no longer allowed; qualifying expenses elementary or secondary school expenses no longer allowed; contributions to a Coverdell account and a Sec 529 Qualified Tuition Program no longer allowed in the same year; education credits in a year in which a Coverdell withdrawal is made no longer allowed.

American Opportunity Tax Credit: Disappears.

Child & Dependent Care Credit: Falls from $3,000 ($6,000 for two or more qualifiers) to 2,400 ($4,800 for two or more qualifiers).

Estate tax: Rise to 45% from current 35% (and from 0% just a couple of years ago) on everything above $3.5 million estate value, down from current $5.12 million exclusion.

Investment surcharge: An Obamacare tax for 2013 and beyond—higher-income individuals hit with an additional 3.8% Medicare tax on net investment income, including long-term gains and dividends.

Medical device tax: 2.3% on top-line revenues of companies making devices such as prosthetic limbs, pacemakers, and operating tables.  This is levied even if the respective company doesn’t earn a profit.

Employer Health FLEX-Spending Plan Contributions: Maximum amount available for reimbursement of incurred medical expenses in an FSA for a plan year cannot exceed $2,500, down from…unlimited.

Codification of the “economic substance doctrine: Allows IRS to disallow tax deductions and other tax-minimizing plans solely on the IRS opinion that the matter lacks “substance.”

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