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The SD-PFS*Ticker
Vol 4, Issue 2June 2014

Dear Clients and Friends: 
Summer in the city! We're really enjoying all of the activities available here in our new location. Over the winter holidays we enjoyed ice skating, carolers and beautiful lights. Summer has brought us easy access to the Three Rivers Arts Festival, plenty of new dining options and warm lunches on the plaza watching kids of all ages playing in the fountain.

But it's not all fun and games here. For most of us, the 2013 tax season is just a bad memory. However, this quarter's article focuses on the tax changes that took effect in 2013, and reminds us that it is more important than ever to be tax aware and efficient.

We hope you'll find something useful in the information that follows. As always, please feel free to call us with any questions or comments at 412-261-3644.
Did you notice?
Individual tax laws became more taxing in 2013 for high earners. 
... Nancy Skeans


If you had to do a double-take when you reviewed your 2013 federal individual income tax return, rest assured, you were not the only one surprised by the impact of the new taxes and higher tax brackets that went into effect on January 1, 2013. The tax increases, any of which you may have missed due to the controversy taking place in Congress over the last several years, were imbedded in two different laws.


The two new taxes were directly tied to the Affordable Care Act (ACA), more commonly referred to as Obamacare. The first of these taxes only impacts wages, compensation and self-employment income currently subject to Medicare Tax above certain thresholds. The tax (the Hospital Insurance Tax) is 0.9% of the amount that exceeds $250,000 for a couple filing jointly and $200,000 for a single filer.


The second new tax that debuted in 2013 as part of the ACA was the 3.8% net investment income tax. The calculation of this tax is somewhat of an exercise.  Thankfully, the IRS created the new Form 8960 just for this purpose.  The net investment income tax is also based upon a threshold; the taxpayer's modified adjusted gross income. The threshold is $250,000 for joint filers and $200,000 for single filers. The tax is assessed only on net investment income, so if you reported wages of $300,000 and had no investment income for example, the tax would not come into play.


In addition to the above, the American Taxpayer Relief Act of 2012 added two new tax brackets for high-income earners (wage or investment income) for the 2013 tax year. The new brackets kick in when one's taxable income exceeds $450,000 for a married couple filing a joint return and $400,000 for a single taxpayer. If you are above these thresholds, the top marginal tax bracket for ordinary taxable income rose from 35% to 39.6%. Long-term capital gains rates and the qualified dividend tax rate rose from 15% to 20%. Furthermore, the phase-out of itemized deductions and personal exemptions was reinstated for incomes over $300,000 (married joint) and $250,000 (single).


Now that the dust has started to settle on the 2013 tax filing season, I also wanted to take the opportunity to highlight some strategies that you can take advantage of to minimize the impact of these new and higher taxes. Here are just a few ideas that Schneider Downs Wealth Management Advisors employs to help cut the tax bite:

  1. For individuals who are employees, it is more difficult to defer or accelerate your employment income, but for business owners, there may be valid reasons and avenues to smooth income. 
  2. Maximize pre-tax contributions to pension and profit sharing plans to lower taxable income. 
  3. If you employ fixed income in your investment strategy, consider tax-exempt bonds. Tax-exempt bond income is not included in any of the above calculations. (Note:  Some tax-exempt bonds are subject to the Alternative Minimum Tax.)
  4. Avoid short-term capital gains. They are treated as ordinary income, and at the highest marginal level, they can be taxed at 43.4%. 
  5. Harvest your tax losses, if you have them, to offset taxable gains.
  6. If you are charitably inclined, consider using highly appreciated stock to make charitable gifts. 

The tax laws discussed above (using the 2013 thresholds) are probably going to be with us for some time into the future, so it is not too late to start planning for 2014 and the tax seasons that follow.  My best advice is to talk to your tax professional and your investment advisor to determine what strategies might work for you. 

Everyone Loves Summer Vacation!  palmtree_hammock.jpg   

Maybe you're packing and getting ready to go, or maybe
you're just not sure where to head this summer to get away from it all. If you're still looking for some help, we've included a few travel tools and tips in our Toolbox above. These links include tips on planning your trip, traveling with ease, and staying safe once you arrive. Whatever your plans, we hope you have a safe and relaxing summer. 


The Schneider Downs Wealth Management Team

Don, Nancy, Beth, John, Vicky, Theresa, Karen, and Julie Ann.
Quotation Marks 

"The difference between death and taxes is death doesn't get worse every time Congress meets."   

~ Will Rogers

SD Toolbox 
Links to tools, calculators and web apps we like.
Articles of Interest
What We're Reading

"Flash Boys"   

by: Michael Lewis 


The first word of the Washington Post's review of Michael Lewis' latest book about the rise of high-speed computerized stock trading is Fascinating. "Flash Boys" follows the author's 1989 book, "Liar's Poker," which detailed the story of Salomon Brothers' bond traders. It details how investment firms, big banks and the stock exchange use high-speed computers and complex software algorithms to make money from the trades of everyday investors.


Evil Twinning -- have you ever gone into a coffee shop and been presented with a list of available networks? Often, thieves will set up networks with similar names to get you to connect to enable them to steal your information. Always verify connections!  

Links within this newsletter are for informational purposes only.   
Material does not necessarily represent the views of SDWMA, and all information is believed to be from reliable sources; however, we make no representations as to their completeness or accuracy.