An Overview of Federal &
State Income Taxes
How Much Will You Keep?
February 17, 2015
David Miller, EA
OBJECTIVES
 Provide an overview of federal
& state income taxes
 Discuss some potential
deductions & associated issues
 Share common questions &
concerns
How Much Should Be Set Aside?
The Quick Answer
 Highest federal rate – 39.6%
(over $465 K, MFJ)
 NIIT rate – 3.8% (over $250 K, MFJ)
 Highest Ohio rate – 5.4%
(over $208 K)
 Combined highest rate – 48.8%
Federal Income Tax Rates
2015 MFJ
 <$18,450
- 10%
 $18.4 - $74.9K - 15%
 $74.9 - $151.2K - 25%
 $151.2 - $230.4K - 28%
 $230.4 - $411.5K - 33%
 $411.5 - $464.8K - 35%
 $464.8 K & up
- 39.6%
Federal Income Tax Rates
2015 Single
 < $9.2K
- 10%
 $9.2
- $37.4K - 15%
 $37.4 - $90.7K - 25%
 $90.7 - $189.3K - 28%
 $189.3 - $411.5K - 33%
 $411.5 - $413.2K - 35%
 $413.2 K & up
- 39.6%
Long Term Capital
Gains Rates
 Ord tax rate is 10% or 15% CG rate is 0%
 Ord tax rate is 25% to 35% CG rate is 15%
 Ord tax rate is 39.6% CG rate is 20%
Net Investment Income Tax
(NIIT)
 Part of Affordable Care Act
 For tax years after 12/31/12
 3.8% of excess over $250,000
(MFJ); $200,000 (single)
 Applies to “investment income”
(ordinary inc + capital gains)
Alternative Minimum Tax
(AMT)
 The original flat tax - 26% / 28%
 2015 exemption amts - $53,600
(S); $83,400 (MFJ)
 Phaseouts $158.9 - $492.5 K
(MFJ); $119.2 - $333.6 K (S)
 Sch A deductions added to AMTI
Trust Income Tax Rates
 Not over $2,500
 $2,500 - $5,900
 $5,900 - $9,050
 $9,050 - $12,300
 Over $12,300
-
- 15%
- 25%
- 28%
- 33%
39.6%+NIIT
Ohio Income Tax Rates
2014
 $15.6 - $20.9K
 $20.9 - $41.7K
 $41.7 - $83.3K
 $83.3 - $104.2K
 $104.2 - $208.5K
 $208.5 K & up
-
2.7%
3.2%
3.7%
4.3%
5.0%
5.4%
Other Ohio Taxes &
Deductions
 CAT tax - $150 for gross
income of $150 K to $1million;
.26% for income over $1 million
 OH Small Business Deduction 50% reduction of business
income; max of $125,000
How Much Should Be Set Aside?
The Quick Answer
 Will my tax rate really be 49%?
▪ Probably not, however
▪ Your tax rate will depend on
your “normal” taxable income
+ the amt of addt’l income
 49% is good for tax planning
Estimated Federal Tax
Payments
 To avoid penalties - need to have
110% of previous year’s tax liability
paid in (w/h or estimated pmts)
 Tax amt - Form 1040, ln 63 (2014)
 Make sure to pay Uncle Sam &
Ohio first !! (or at least set aside)
2015 Federal Tax
Phaseouts
 Itemized deductions - reduced by
3% of excess over $309K ($258K)
or 80% of allowable deduction
 Personal exemption – reduced by
2% from $309 - $432 K (MFJ); from
$258 - $380 K (S)
 Personal exemption = $0 over limit
A Political Football –
Section 179
 Sch F or Sch C profits, W-2
wages, bus cap gains, etc.
 Greater of $500,000 or
business income (2014 limit)
 For 2015 – currently $25,000 &
subject to whims of Congress
A Political Football 50% Spec Depr Allowance
 Additional First Year Depreciation
▪ 50% in 2014 (current limit)
▪ New bus property - 20 yr or less
▪ No income limit
 For 2015 – no 50% SDA & subject
to whims of Congress
Social Security Benefits
 Will lease money or royalties affect
my Soc Sec benefits?
 No, only earned income affects Soc
Sec benefits; these are not earned
income
 Then why is my Soc Sec check
less?
2015 Medicare Premiums &
Income Limits (MFJ)
 $104.90 - income $170 K or less
 $146.90 - income $170 - $214 K
 $209.80 - income $214 - $320 K
 $272.20 - income $320 - $428 K
 $335.70 - income over $428 K
Medicare premiums lag 2 years
Social Security Benefits &
Medicare Premiums
 Medicare premiums are
deducted from Soc Sec pmts
 Medicare premiums increase 2
yrs later after bump in income
 Soc Sec pmts decrease due to
increase in Medicare premium
Are Gifts to Children
Deductible?
 No, oil & gas money is taxable
to you as the landowner
 Giving that money to family
members is not tax deductible
 Gifts of $14,000 or less are gift
tax-free (no gift tax return
required)
Questions?