Election Day and Taxmageddon

by Kenneth Hoffman in ,

Election Day is almost here, and taxes are taking center stage in this campaign. We're not here to tell you how to vote. But we want you to know that we're following the race with an eagle eye. Our goal is to help you make the most of whatever changes eventually come with the next administration.

Several important tax changes are scheduled to take effect on January 1, and we're paying close attention to all of them:

  • The Bush tax cuts are scheduled to expire. This will mean higher tax rates for everyone, along with a higher top rate of 39.6% for the highest-earning taxpayers.
  • Top rates for long-term capital gains and qualified corporate dividends climb back from 15% to 20%.
  • The employee portion of Social Security and self-employment tax goes back up from 4.2% to 6.2%.
  • The Medicare tax will go up by 0.9% for individuals earning over $200,000 ($250,000 for joint filers, $125,000 for married individuals filing separately).
  • Finally, there will be a new "Unearned Income Medicare Contribution" of 3.8% on investment income of those earning more than $200,000 ($250,000 for joint filers).

Below is our 2012 Campaign Tax Comparison to help you compare the current law with the Obama and Romney proposals. We'll be following the campaign carefully in order to help make the most of your opportunities, no matter who wins. And of course, if you have any questions, don't hesitate to call us at 954-591-8290.

2012 Election Tax Outlook

Current Law

Obama Plan

Romney Plan

Top Marginal Rate – Ordinary Income




Top Marginal Rate – Capital Gains


(plus 3.8%2)


Top Marginal Rate – Qualified Dividends


(plus 3.8%2)


Top Marginal Rate – Corporations




Payroll Tax


Increase top rate from 2.9% to 3.8%

No Change

Alternative Minimum Tax


(incomes >$1 million)


Estate Tax Unified Credit

$5 million6

$3.5 million


Estate Tax Rate




1Romney’s plan would extend current rates for 2013. Ultimately, he would lower rates by 20% across the board, and replace lost revenue by eliminating unspecified “loopholes and exclusions”

2Beginning on January 1, 2013, the Patient Protection and Affordable Care Act imposes a new “Unearned Income Medicare Contribution” applies on investment income for taxpayers with incomes over $200,000 ($250,000 for joint filers)

3Romney has proposed to eliminate all tax on capital gains, dividends, and interest for taxpayers earning under $200,000

4Currently, FICA and self-employment taxes total 13.3% on incomes up to the Social Security wage base, plus 2.9% Medicare tax on earned income above that figure.

5Obama has proposed to replace the current AMT with a “Buffet tax” of 30% on incomes above $1 million

6Estate taxes are scheduled to revert to a $1 million unified credit and 55% rate on January 1, 2013


K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.