FEDERAL AND CALIFORNIA TAX OUTLOOK

Federal Tax Outlook

The “Fiscal Cliff” is looming and lawmakers in Washington will likely struggle with negotiations up to the last minute, if they resolve the situation.  President Obama has made a proposal and Congress will once again work on a solution.  In the meantime, barring legislation, we’ve prepared a Federal and California Tax Outlook table that will help you to understand the current status of income taxes, depreciation, and estate and gift taxes.

State Tax and Proposition 30

Proposition 30 retroactively increases income taxes, effective January 1, 2012.  The following rate increases are effective for seven years:

    • 10.3% (1% increase) on income of:
      • $250,001-$300,000 for Individuals (and Married Filing Single)
      • $340,001-$408,000 for Heads of Household
      • $500,001-$600,000 for Married Filing Jointly
    • 11 .3% (2% increase) on income of:
      • $300,001 – $500,000 for Individuals (and Married Filing Single)
      • $408,001-$680,000 for Heads of Household
      • $600,001-$1,000,000 for Married Filing Jointly
    • 12 .3% (3% increase) on income of:
      • More than $500,000 for Individuals (and Married Filing Single)
      • More than $680,000 for Heads of Household
      • More than $1,000,000 for Married Filing Jointly

(Note: Income in excess of $1 million is also subject to the 1% mental health surcharge.)

Proposition 30 also increases the state sales tax rate by 0.25% for four years, beginning January 1, 2013, bringing the standard statewide rate to 7.50% (currently 7.25%).