by Richard S. Schwartz CPA. CVA

Will the re-elected President and the new Congress let all these tax rules expires? We’ll have to wait and see.? Here is a recap list of all the changes that will be made to the Tax Code if Congress and the President aren’t able to pass a Tax Act soon:

Personal Income Tax Rates:

  • 10% tax rate increases to 15% tax rate
  • 15% tax rate remains at 15% tax rate (but a portion increases to 28% tax rate for people filing as Married Filing Jointly)
  • 25% tax rate increases to 28% tax rate
  • 28% tax rate increases to 31% tax rate
  • 33% tax rate increases to 36% tax rate
  • 35% tax rate increases to 39.6% tax rate

Tax Rates on Capital Gains and Qualified Dividends:

  • 0% long-term capital gains tax rate for taxpayers in the 10% and 15% tax brackets will increase to 15%.
  • 15% long-term capital gains tax rate for all other taxpayers will increase to 20%.
  • Qualified dividend tax rate at 15% will no longer?exist. Dividends will be taxed at your marginal tax rate.


  • 3% phase-out on itemized deductions for income that exceeds certain thresholds is re-instated.
  • Phase-out of personal exemptions once income exceeds certain thresholds is re-instated

New Medicare Taxes:

  • 0.9% Medicare tax (referred to as the Health Insurance or HI tax) imposed on wages and SE income that exceeds $200,000 for single filers and $250,000 for MFJ filers. (Payable by employees only. Employers?are not required to match that tax.)
  • A 3.8% Medicare surtax on net unearned/net investment income if MAGI exceeds $200,000 for single filers and $250,000 for MFJ?filers. Net investment income includes interest, dividends, annuities,? royalties, rents, passive income, capital gains. The surtax is the lesser?of:

1. Net Investment income, or

2. The excess of MAGI over the threshold amount

Social Security Tax:

  • Social Security taxes withheld from an employee’s salary revert back from 4.2% to 6.2% of earnings.
  • Social Security wage base increases from $110,100 to $113,700.

Alternative Minimum Tax:

Depreciation and Equipment Purchases:

  • Maximum Section 179 depreciation reduces from $139,000 to $25,000.
  • Bonus depreciation expires.
  • Purchases of medical devises will be subject to a 2.3%?excise tax on purchase price of the equipment.

Estate and Gift Taxes:

  • $5M exemption (with an allowance of portability between? spouses ? when one spouse died the unused $5M exemption of the deceased??spouse would be added to the exemption of the surviving spouse) reverts back to $1M (with no portability).
  • 35% Estate tax rate changes to progressive tax rates with the highest rate set at 55%.
  • Annual gift tax exclusion increased to $14,000.
  • 529 college savings amount increased to $70,000? ($140,000 joint)

Other Expiring Provisions:

  • Marriage penalty relief (expending of the 15% tax bracket and standard deduction for MFJ filers to be twice that of Single?taxpayers).
  • Dependent care credit based upon $3,000 per child and $6,000 for two or more children reduces to $2,400 and $4,800 respectively.
  • The child tax credit amount reverts from $1,000 to $500 and is no longer a “refundable” credit.
  • The American Opportunity college tuition tax credit.? (The Hope and Lifetime Learning Credits both continue.)
  • The exclusion from gross income for discharge of indebtedness on a principal residence.
  • The exclusion for employer-provided education assistance (with an annual max of $5,250).
  • The $250 deduction for teacher expenses.
  • The deduction for Mortgage Insurance Premiums.
  • The deduction for state and local sales tax instead of??state income taxes on Schedule A.
  • The above the line deduction of up to $4,000 for?qualified tuition expenses.
  • The tax-free treatment of charitable distributions made?from IRA?s of people over the age of 70.5.
  • Tax credits for plug-in vehicles and alternate fuel vehicles.