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Fri Nov 9, 2012, 03:20 PM

The tax increase is on "Income over 250K" not "People making 250K"

This is a case where the best spin is the flat truth.

A person making $250,000/year in taxable income (meaning probably making over $300K net, in practice) faces no tax increase whatsoever.

A person making $300,000/year in taxable inome faces a tax increase of $2,000. That is an effective tax increase of 0.66%.

A person making $400,000/year in taxable inome faces a tax increase of $6,000. That is an effective tax increase of 1.5%.

A person making $500,000/year in taxable inome faces a tax increase of $10,000. That is an effective tax increase of 2%.

A person making One Million Dollars/year in taxable inome faces a tax increase of $30,000. That is an effective tax increase of 3%.

There is no tax icrease on people making $250K.

The tax increase on Millionaires is 3%.

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Reply The tax increase is on "Income over 250K" not "People making 250K" (Original post)
cthulu2016 Nov 2012 OP
sharp_stick Nov 2012 #1
slutticus Nov 2012 #2
Live and Learn Nov 2012 #6
hunhare Nov 2012 #3
1StrongBlackMan Nov 2012 #7
subterranean Nov 2012 #10
subterranean Nov 2012 #16
Live and Learn Nov 2012 #4
wryter2000 Nov 2012 #5
1StrongBlackMan Nov 2012 #8
liberal_at_heart Nov 2012 #9
drmeow Nov 2012 #11
L0oniX Nov 2012 #12
LineNew Reply .
mzmolly Nov 2012 #13
SickOfTheOnePct Nov 2012 #14
mzmolly Nov 2012 #15

Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:24 PM

1. Thank you

I've been trying to find a way to explain it and this looks really nice.

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:26 PM

2. How does this stuff work with married couples?

I never understand how this works. All of the tax things (even on local propositions here in CA) are written in terms of single filers. What about married folks? Does this mean married and making 500k per year? Or married and still 250k? In any case, i wish i had that kind of dough

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Response to slutticus (Reply #2)

Fri Nov 9, 2012, 03:30 PM

6. Married and making $500,000 per year.

The San Francisco Chronicle: "The governor and the ruling Democrats in the Legislature have given Californians who care about schools and the current-year deficit only one real choice: support Prop. 30, which would raise taxes on incomes starting at $250,000 for individuals, $500,000 for married couples, and the state portion of the sales tax (now 7.25 percent) by a quarter cent ... Prop. 30 provides a necessary budget patch - especially with the Legislature's Republicans unwilling to consider any tax increases."


http://ballotpedia.org/wiki/index.php/California_Proposition_30,_Sales_and_Income_Tax_Increase_%282012%29

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:26 PM

3. A question about the real estate 3.8% sales tax myth

I think this is related to the above (thanks for the explanation), as it concerns capital gains.

My mother (arch conservative) is despondent because she is currently trying to sell her house in Idaho after the passing of my dad. The house is worth quite a lot, having increased in value since the 1980s when it was built. She is likely to make more than $250,000 profit if it does sell (despite the slow market).

However, she doesn't have any income except my dad's Social Security check.

Will she have to pay the 3.8% tax on capital gains on the house sale if it's more than $250,000?

Thanks for the flat truth!

Dana

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Response to hunhare (Reply #3)

Fri Nov 9, 2012, 03:41 PM

7. My understanding is ...

if she takes the proceeds from the sale and purchases other primary residence, the amount subject to the tax is the difference between the gain and the purchase price of the new residence.

But I would check with a tax accountant.

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Response to hunhare (Reply #3)

Fri Nov 9, 2012, 05:28 PM

10. Yes, in that case she would be subject to the tax.

The 3.8% Medicare tax will only apply to taxpayers with an adjusted gross income (AGI) above $200,000 ($250,000 for a married couple) who have capital gains in excess of $250,000 ($500,000 for a married couple filing jointly).

If your mother sells her home, and her profit from the sale is $300,000, she would only owe the tax on the last $50,000. At a rate of 3.8%, that's $1,900.

It's a little complicated, so I recommend consulting a tax advisor.

Note that this tax takes effect on January 1, 2013, so if she sells her house before the end of this year, she will not have to worry about the Medicare tax at all.

Sources:
http://health.burgess.house.gov/uploadedfiles/one_page_on_unearned_medicare_tax.pdf

http://www.floridaselectrealestate.com/Blog/current%20month/22

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Response to hunhare (Reply #3)

Fri Nov 9, 2012, 09:00 PM

16. Another tax consideration

Under current tax law, when you sell a home that was your primary residence, profits up to $250,000 for an individual or $500,000 for a married couple are exempt from capital gains tax. But amounts above those levels are subject to capital gains tax, which is currently 15%.

Can your mother still file a joint return with your late father for this year? If so, and she sells the house this year, her exemption would be $500,000. If the net capital gain is $300,000, she would owe no capital gains tax. But if she sells the house next year, when she files as an individual taxpayer, her exemption would only be $250,000, and she would owe 15%, or $7,500 on the $50,000 above that. It may be worthwhile to slightly under-price the house for a quick sale this year to avoid the capital gains tax, and the Medicare tax that takes effect next year.

But again, I'm not an accountant, and you should talk to a tax specialist about this. There may be special considerations in the case of the death of a spouse.

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:29 PM

4. People really have a problem understanding this for some reason.

I always try explaining that the rich will pay the same taxes they do on the amount of income they make. It is perfectly fair and reasonable.

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:30 PM

5. Wish I could recommend this more than once

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:43 PM

8. And, moreso ...

folks should be made aware that the increase is MARGINAL, but that's what you meant, right?

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 03:47 PM

9. good point

We need to be more informative when defending these tax increases.

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 05:42 PM

11. What I thought when I read your title

People aren't taxed, income is taxed.

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 05:48 PM

12. A 5 million a yr resturaunt typically makes $250k net profit.

WTF ...people need to go back to high school and learn something for a change. Is it nessesary to explain gross and net profit? Say your net profit is going to go over $250k by $18k ...so hire one more person and pay them $15k and match the taxes and you still make $250k and pay no more than you did before you hired the extra person. Is it rocket science yet?

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Response to cthulu2016 (Original post)

Fri Nov 9, 2012, 06:32 PM

13. .

Last edited Fri Nov 9, 2012, 08:41 PM - Edit history (1)

K and R

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Response to mzmolly (Reply #13)

Fri Nov 9, 2012, 06:33 PM

14. It's on taxable income, not AGI n/t

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Response to SickOfTheOnePct (Reply #14)

Fri Nov 9, 2012, 08:40 PM

15. Oops. Thanks for

clarifying. An important distinction!

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