The election is over - now what? We recently held free tax planning and preparation seminars discussing the tax consequences of the 2012 election. The seminar featured Steven Hartstein, CPA, JD - Partner, and Jenna Staton, EA - Manager, and covered several topics including: •Year end tax planning for individuals and businesses •Year end tax planning using the estate and gift tax laws for 2012 •2013 tax law if no changes are made •What the future holds based upon post-election Congress If you have questions, please feel free to contact our Tax Planning & Preparation Group at 440-449-6800.

1. Delivering on the Promise.
The Election Is Over – Now What?

2. Delivering on the Promise.
AGENDA
• 2013 Tax Law If No Changes Are Made
• Year-End Tax Planning for Individuals and
Businesses
• Year-End Tax Planning Using The Estate
and Gift Tax Laws for 2012
• What The Future Holds Based On Post-
Election Congress
• Q&A

3. Delivering on the Promise.
2013 LAW: NO CHANGES
What is the big deal?
• Tax Rates
2012 Tax Rate 2013 Tax Rate 2013 Tax Rate w/ Surtax
10% 15% 15%
15% 15% 15%
25% 28% 28%
28% 31% 34.8%
33% 36% 39.8%
35% 39.6% 43.4%
• Dividend and Capital Gain Rates
2012 Tax Rate 2013 Tax Rate
Qualified Dividend 15% Ordinary
Ordinary Dividend Ordinary Ordinary
Short-Term Capital Gain Ordinary Ordinary
Long-Term Capital Gain 15% 20%

4. Delivering on the Promise.
2013 LAW: NO CHANGES
Other Expiring Provisions
• 2% temporary Social Security payroll tax cut on wages
• Dollar limit maximum return to $2,400 for one child and
$4,800 for two or more qualifying individuals for dependent
care expenses
• Child Tax Credit drops from $1,000 to $500
• American Opportunity Credit reverts to Hope Credit (non-
refundable and only allowed for first two years of college)

5. Delivering on the Promise.
2013 LAW: NO CHANGES
Other Expiring Provisions
• Maximum income and credit reduced for Earned Income
Credit
• Work Opportunity Credit expires
• 3% reduction in itemized deductions for Married Filing Joint
(MFJ) Adjusted Gross Income over $175,000
• Debt & Mortgage Forgiveness Tax Relief expires 12/31/12
• Personal exemption phase-outs come back

6. Delivering on the Promise.
2013 LAW: NO CHANGES
Other Expiring Provisions
• Student Loan Interest Deduction will now only be eligible if
within the first 60 months of repayment
• 7.5% medical deduction limit increases to 10%
• Bonus depreciation expires – currently at 50%
• Section 179 expensing becomes limited to $25,000 –
currently $139,000
• Exemption for estate tax and gifts reverts back to $1,000,000
and estate tax rates revert to 55%
• Flexible Medical Spending Accounts are reduced to $2,500

7. Delivering on the Promise.
2013 LAW: NO CHANGES
Patient Protection And Affordable Care Act
• Two Parts
̶ .9% Increased Medicare Tax due on wages earned over $200,000
Single and $250,000 MFJ
̶ 3.8% surtax on at least a portion of investment income, such as
capital gains, dividends, and net rental income

8. Delivering on the Promise.
2013 LAW: NO CHANGES
Patient Protection And Affordable Care Act
Example:
• Ron
• Single taxpayer
• Self-employed
• $500,000 Earnings
• $500,000
-200,000
$300,000 Subject to .9% surtax

9. Delivering on the Promise.
2013 LAW: NO CHANGES
Patient Protection And Affordable Care Act
Example 2:
• Marion
• Single taxpayer
• $0 wages
• $225,000 Net Investment Income
• $225,000 MAGI
-200,000 Threshold
$25,000 Subject to 3.8% surtax

10. Delivering on the Promise.
2013 LAW: NO CHANGES
Patient Protection And Affordable Care Act
Example 3:
• Steve and Debbie
• Married, filing jointly
• $200,000 Combined salary
• $150,000 Net Investment Income
• $350,000 MAGI
-250,000 Threshold
$100,000 Subject to 3.8% surtax
• Lesser of Net Investment Income or Excess of MAGI over
Threshold

11. Delivering on the Promise.
2013 LAW: NO CHANGES
Patient Protection And Affordable Care Act
Net Investment Income
Includes Does Not Include
Interest Salary, Wages, Bonuses
Dividends Distributions from IRAs or Qualified Plans
Any income taken into account for self-
Annuity Distributions
employment
Net Rental Income Gain on the sale of an active business
Royalties Tax-exempt interest
Veterans benefits
Income from Passive Activities
Net Capital Gain from Sale of
Property
Passive Sale of Business

12. YEAR-END TAX PLANNING: Delivering on the Promise.
INDIVIDUALS
Individual Tax Credits Available in 2012
• Adoption Credit - $12,650
• Child and Dependent Care Credit
• Disabled Access Credit
• Education Credits
• Pension and Start-Up Plan Credit
• Retirement Savings Credit

13. YEAR-END TAX PLANNING: Delivering on the Promise.
INDIVIDUALS
Individual Tax - Moves to Make Now
• Make charitable gifts
• Make an extra mortgage payment
• Maximize contributions to employer-sponsored plans
• Evaluate stock options
• Evaluate stock portfolios before harvesting gains and losses
• Convert IRA to Roth IRA

14. YEAR-END TAX PLANNING: Delivering on the Promise.
INDIVIDUALS
Individual Tax - Moves to Make Now
• Use up funds in medical and dependent care Flexible
Spending Accounts
• Accelerate medical expenses
• Set up Health Savings Account for 2012
• Accelerate next semester’s college tuition payment
• Prepay state and local taxes (if not subject to AMT)

15. YEAR-END TAX PLANNING: Delivering on the Promise.
BUSINESSES
Business Tax Credits Available in 2012
• Small Employer Heath Insurance Credit
• Fuel Tax Credit
• Disabled Access Credit
• Retirement plan startup costs
• Work Opportunity Credit

16. YEAR-END TAX PLANNING: Delivering on the Promise.
BUSINESSES
Businesses – Moves To Make Now
• Have a closely-held business pay dividend
• Buy depreciable equipment for closely-held business
• Accelerate year-end bonuses into 2012

17. YEAR-END TAX PLANNING: Delivering on the Promise.
2012 ESTATE & GIFT TAX LAW
Estate and Gift
• Contribute to 529 Education Savings accounts
• Make gifts of cash to family and friends or forgive loans of up
to $13,000
• Make lifetime gift of up to $5,120,000 per person

18. WHAT THE FUTURE HOLDS, BASED ON Delivering on the Promise.
POST-ELECTION CONGRESS
Look Into My Crystal Ball
• Likely to be renewed - Expired 12/31/11
– Higher Education Tuition Deduction
– State and Local Sales Tax Deduction
– Teachers’ Classroom Deduction
– Qualified Charitable Distributions from IRA’s
– Research Tax Credit
– Section 179 Expensing
– Work Opportunity Credit
– 15-Year Recovery for Qualified Leasehold Improvements
• What about the Medicare surtax?

19. WHAT THE FUTURE HOLDS, BASED ON Delivering on the Promise.
POST-ELECTION CONGRESS
Look Into My Crystal Ball
• Estate and gift tax
– Likely a $3.5 million exemption for estates
– Likely a $1 million exemption for lifetime gifts
• What about portability??

20. WHAT THE FUTURE HOLDS, BASED ON Delivering on the Promise.
POST-ELECTION CONGRESS
Look Into My Crystal Ball
• Democrats:
– Raise tax rates on ‘high income’ taxpayers, those making over
$250,000/year
– Limit itemized deductions
– Extend Bush tax cuts for those making under $250,000
• Republicans:
– Do not raise taxes, but close tax loopholes
– Limit itemized deductions
– Entitlement reform

21. WHAT THE FUTURE HOLDS, BASED ON Delivering on the Promise.
POST-ELECTION CONGRESS
Still To Be Voted On For 2012 Taxes!
• AMT Patch
̶ Mechanism used by Congress to offset the failure of the tax law to
automatically require an adjustment of the Alternative Minimum Tax
brackets for inflation
̶ Actual ‘patch’ is an exemption
 2011 = $74,450 (MFJ)
̶ What if Congress doesn’t act?
 25 Million more Americans will pay the Alternative Minimum Tax
 IRS stated there would be a delay in processing tax returns and
refunds

22. Delivering on the Promise.
Questions?