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TaxationNew Jersey

January, 2014

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2

Taxation on Individuals in U.S.

Federal Income Tax Social Security & Medicare Tax Business Tax

Capital Gains & Dividend Income Tax Estate Tax Excise Tax

State & Local Government

Property tax & Sales, use tax

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Income and AGI

Internal training only. Not for public presentation oradvertisement of any product.

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Income

W-2Taxable interest: CD, checking (Schedule B)Dividend, (Qualified Dividend not here) (Schedule B)Business income or (loss) (Schedule C)Capital Gain or loss (Schedule D)Retirement distribution: IRA, pension, and annuity (taxable part).Rental real estate, royalties, S corporation, trust, Schedule DFarm income or loss (schedule F)Social Security distribution (taxable part).

combine allamounts, thisis your TOTALINCOME

Educator ExpenseHealth saving plans, moving expense,Self-employed health insuranceQualified Retirement plans: IRA, SEP, SIMPLEStudent loan interest, tuition and fees

combine allamounts, thisis adjust part

Adjusted Gross Income = Total Income Adjustment Part

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Taxable Income

Internal training only. Not for public presentationor advertisement of any product.

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AGI Deduction Personal Exemptions = Taxable Income Personal Exemptions = $3,900 x qualified house hold number

Deduction: Standard or Itemize (which is higher)

Publication 17: Federal Income Tax

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Standard Deduction

Internal training only. Not for public presentation oradvertisement of any product.

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Standard or Itemized Deduction? Use the larger one

Itemized Deduction (Schedule A):

Medical expense State & Local income tax

Personal property tax Home mortgage interest Charity contribution Casualty or theft loss Job expenses, unreimbursed employee expenses and more

Gambling losses

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Personal exemption

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Total number of exemptions $3900 (year 2013)

- Spouse

- Children- Visiting Parents (183 days test)

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G r o s s

I n c o m e

401k

AGI

Personal Exemption ($3,800 x n)

Itemized Deduction:State/Local/Property Tax

Mortgage Interest

Taxableincome

450,000

398,350

223,050

146,400

72,500

17,850

0

Marginal Tax Rate

Effective Tax Rate

Marginal Tax Rate vs. Effective Tax Rate(Year 2013, Married Filing Jointly):

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TAX CREDITS

Child credit

Earned Income (Table)

Dependent Care credit

Education credits

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Schedule C Profit or Loss forBusiness

Part I: Income Input your business income on Line7

Part II: Expense

Part III: Cost of Goods Sold (Ignore) Part IV: Information on your vehicle Part V: List your other expense

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Schedule C Part II: Expense L9: Car expense:

Actual expense OR Standard mileage rate L15: Insurance (E&O) L17: Legal & Professional service: tax service L18: Office expense: laptop, projector, printer, ink, paper L23: Taxes & Licenses L24 a: Travel (include meals and tickets) L24 b: Meals only can be deducted; L27: Other expenses:

Cell phone (business part)

House deduction (business) Party (business) Clothes with companys logo Training registration fee Business gift: $25 per recipient per year

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Index Fund Taxation

For Internal Training Only15

* 33% income tax rate and 22% capital gain tax rate apply

Vanguard 500 Index $10k initial 1976-2012

After Tax $240,377

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Tax on Mutual Fund

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Vanguard 500 Index Fund InvestorShares (VFINX)

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New Law: Sales of Principal Residence

After December 31, 2008Nonqualified use portion: cannot be excluded

Nonqualified use: such as--- room rental--- use for business

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Taxes on Real Estate

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Gain: 300KTaxable: 120K (300K x 40%)40K: Income (due to

depreciation recap)80K: Long term gain

Excluded: 180K(< 250K)

1/2008

Buy at $440K

1/2010

Rental: 2years$20K

depreciation

Use as Residential Home2013

Sell at $700K

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Income tax

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AMT

- The exemption is permanently patched, andinflation adjusted

- For year 2012, $50,600 (individuals) and$78,750 (married filing jointly)

- For 2013: $80,800 (MJ) and $51,900(individual)

- Phase-out: $153,900-$477,100

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AMT

Purpose: limit tax benefits from large amount ofdeductions

Flat tax rate Below $179,500 (MJ): 26% Above $179,500 (MJ): 28%

Capital Gain: each additional dollar of capital gains phases out25% of your allowed AMT exemption

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Alternative Minimum tax

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Income Regular Federal Tax AMT

W-2 $200,000 $200,000401k contribution $30,000 $30,000

Long-term capital gain $40,000 $40,000

Total income $210,000 $210,000

Deduction

State/Local income tax $14,700 $0

Real estate tax $20,000 $0

Mortgage interest $30,000 $30,000

Personal Exemption (4 people) $15,600 $0

AMT exemption $80,800 phase out to $74,275

Tax rate

Tax Bracket 26% or 28%

Tax due

$20,282 $23,089

AMT liability $2,807

AMT

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Historic tax rate1985 19602011

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Where to Save Money

Tax Now

Checking

Saving

CD

Stock

Mutual Fund

Tax Later

401(k)/403(b)

IRA/SEP-IRA

Annuity

Pension

Social Security

Investment Property

Tax Free

ROTH-IRA

529

7702 IUL

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Financial Planning

Tax

Planning

RetirementAccount

Real Estate

Commodity

Equity

Cash

Insurance