Important information for Nevada realtors dealing with California clients regarding possible relocation to Nevada

  • Important information for Nevada realtors dealing with California clients regarding possible relocation to Nevada

1. Federal tax Changes “Looming”: 
a.”Bush Tax Cuts” to expire 12/31/12
b. Top ordinary rate goes from 35% to 39.6%; even bottom end rate to increase from 10% to 15%
c. Top long term capital gain rate goes from 15% to 20%
d. Dividends revert to “ordinary income” and thus taxable at 39.6% versus present 15% rate for “qualified dividends”
e. President Obama releases budget calls for “Buffet Rule” millionaires minimum rate of 30%

2. Patient Protection and Affordable Care Act (“Obamacare”) new taxes “looming”, effective 1/1/13:
a. Medicare (payroll) tax increases of 0.9% on employees and self-employed persons on earnings above 200,000/250,000 joint return
b. New tax: Medicare tax on unread income
i. Interest/dividends/capital gains/annuities/royalties/rents (tax exempt income excluded.
ii. 3.8% Rate
iii. On lesser of net investment income or modified AGI in excess of 200,000/250,000 joint return
iv. NB: This would include capital gains from sales of real estate – primary residence or otherwise!

3. All of the above on top of California presently high structure, which may increase if Brown initiative passes:
a. Present structure
i. 9.3 top marginal rate
ii. Mental Health surtax of 1% for taxable income in excess of 1 million
b. Brown Proposal – “The Schools and Local Public Safety Protection act of 2012”
i. Up to 2% additional income taxes for 5 years starting 1/1/13 on “millionaires and high income earners”
ii. “Temporary” (4 years starting 1/1/13) 1/2 cent sales tax increase
iii. All dedicated to “education and public safety”
iv. Goal – 7 billion additional revenue

4. FTB – one of their “top audit issues” for 2012: 1031 changes
a. The sources of the original deferred gain on California property will remain with California, regardless of the location of the replacement property. When the replacement property is ultimately sold in a taxable transaction, the gain originally deferred on the California property will have its source in and will be taxable by California.\

Credits for this article go to Mr. Jeff Quinn with Certified Public Accountants and Consultants Ltd.

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