Veros Dental

If you think that taxes are already too high and too complicated, take some time to enjoy the tax environment in 2012… because it’s on track to get worse.  Not to mention all of the talk about other changes to help fix the national budget and debt issues.  Here’s a quick overview of scheduled changes that will affect you and your dental practice.

First, for 2012, you’ve likely heard of the payroll tax cut.  This cut is for your employees and applies to you as well on your income for the first two months of the year.  It is a 2% reduction in the FICA tax until the end of February.  In all likelihood, this will be extended until the end of 2012.  This provision was in effect in 2011 as well (for the first time).  The savings capped at about $2,200 for the year for you to the extent your income exceeds $110,000.  If your income is less, the savings are less.

This is the last year where the 3.8% Medicare surtax on investment income is not in effect.  As a part of the Obamacare package, there will be an additional tax on most types of passive income when your annual income exceeds $200,000 – $250,000 (depending on your filing status).  This would apply to interest, dividends, and capital gains.  Contrary to some circulating emails, however, it will not apply to the sale of your home unless you have a very substantial gain when you sell it (over $500,000 of gain for joint filers).

In addition, the Medicare tax will itself increase by 0.9%, effective January 2013.  This increase will also apply only when your annual income exceeds $200,000 – $250,000.  For a dentist making $300,000 a year, this adds another $2,700 to the tax bill.

The capital gains rate of 15% is also currently set to go away.  It will revert to the 20% rate.  in addition, the qualified dividends rate will also go away and dividends will be taxed at your tax bracket rate, as high as 35%.

There is still a lot up in the air about other changes to come.  It is unlikely that much will be decided until after the elections.  So it will probably be the beginning of next year before substantial change is implemented.  But when it does, look for a combination of rate increases and reductions in deductions.  We can hope for simplification too, but don’t hold your breath.