Tax projection for 2013

[cpabsd]

I have a client who had a large capital gain sale in 2013. Their total taxable income is $460 K of which $400k is the capital gain. The program I am using is calculation a tax liability of $114,667. This seems extremely high. Any input please?

Wages 96149

Interest 53

Cap Gain 400,000

Other income 1000

AGI 497202

Standard Ded -10150

Exemptions 0 lose because of AGI

Taxable income 487052

Regular income tax 96503

AMT 8770

Medicare tax surcha 9394

Total Tax 114,667

[jklcpa]

You didn't give enough information to check this. What is the filing status, because it looks like HOH for someone over 65 based on that std deduction, and the amount you listed of $10150 would be the 2012 amount for HOH for a person over 65, yet the medicare surtax seems to indicate this might be a joint return. (497202-250000 = 247202 * .038 = 9394). Is the cap gain short or long? Also, if it's a joint return then the std deduction would be $12200.

[Guest Taxed]

Hopefully the taxpayer made estimated tax payments?

[cpabsd]

I am working on estimated taxes now. The status is Married filing joint. The lower standard deduction is due to the new requirements that reduce exemptions and standard deductions for high income taxpayers. Capital gain is all long term. Taxpayers are both under age 65. They have two college age children but lose the college credits due to income.

[Maribeth]

I plunked your numbers into CFS Tax Tools. I get the same AGI of $497,202.

Standard deduction of $12,000; all the exemptions are lost. Taxable income of $485,002.

Regular tax - $74,858

AMT - 12,165

MC tax - 9,394

Total due - 96,417.

[jklcpa]

I also got down to the same taxable income, but Drake isn't limiting the std deduction and shows $12,200 there. I get these numbers:

Reg tax - $74,864

AMT- $10,409

MC tax - $ 9,394

Total - $94,667

You'd think we should all be getting the same number. There's a question out on the Drake forum to make sure all of the 2013 law changes have now been incorporated into the planner.

Is your program using the cap gain worksheet to calc the tax?

[Maribeth]

I don't believe that the standard deduction is phased out. Isn't it just itemized deductions? So everyone at least gets the standard.

We almost the same on reg tax and the same on MC tax. Why the difference in AMT? Checked the AMT calculation; it is using the Sch D calculation on Page 2. Exemption of $80,800. Maybe that is wrong?

[jklcpa]

I don't think the standard deduction has a phase out, only the itemized and exemptions. You are correct that the AMT exemption is $80800, but it is completely phased out in the OPs scenario. Earlier today I posted over on the Drake forum to see if I could get an answer about whether or not all of the 2013 tax law changes had been incorporated into the planner. In any case, I think that with 2 of us getting a substantially lower number than the OP would warrant his/her rechecking of those calculations, specifically the cap gain tax since that item is the largest part of the taxable income.