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Material prepared by Raymond James for use by its advisors.

Independent Registered Investment Advisor Raymond James Financial Services, Inc. 2012 Tax Update & Year End Planning. Material prepared by Raymond James for use by its advisors. 2012 TAX UPDATE Health Care Reform…. Health Care Reform (ruled constitutional by the Supreme Court)

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Material prepared by Raymond James for use by its advisors.

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  1. Independent Registered Investment Advisor Raymond James Financial Services, Inc. 2012 Tax Update & Year End Planning Material prepared by Raymond James for use by its advisors.

  2. 2012 TAX UPDATE Health Care Reform… • Health Care Reform • (ruled constitutional by the Supreme Court) • In effect now: • Children can’t be denied coverage because of pre-existing conditions • Coverage required under parent’s plan for dependent children under age 26 • Insurers can’t impose lifetime caps on coverage and can’t cancel or deny coverage if you are sick • Key provisions effective January 1, 2013: • Medical expense deduction threshold increases to 10% of adjusted gross income for those under age 65 (from 7.5%) • Increasing the self-employment tax rate by 0.9% on higher-income individuals (MAGI of $200K single, $250K married) • New 3.8% tax on some or all of the net investment income of these higher-income individuals • Interest, dividends, capital gains, royalties, rents, annuities, passive income from partnership/S corporation • Distributions from qualified retirement plans and IRAs would NOT count • Key provisions effective January 1, 2014: • All Americans must carry health insurance or face a penalty of up to 2.5% of household income • Employers with more than 50 employees must offer health insurance or be fined per employee • States must establish an exchange that facilitates the purchase of qualified health plans • Adults with pre-existing conditions can’t be denied coverage or have their insurance cancelled • Tax credits will be available to qualifying families • Doctors and hospitals will receive less compensation from government sources • Taxes or fees imposed on health insurance providers and drug companies • Note: The above list of items is not intended to be all inclusive.

  3. 2012 TAX UPDATE Expiring Tax Provisions… • Federal income, dividend, & capital gains tax rates • Itemized deductions & personal exemption phase-outs • AMT exemption amounts • Social Security payroll tax reduction for employees • Qualified charitable IRA distribution exclusion • State and local sales tax deduction • Education credits & deductions eliminated or reduced • Earned income and child tax credits reduced • Estate & gift tax exemption amounts • Portability of estate tax exemption for surviving spousal • Note: The above list of items is not intended to be all inclusive.

  4. 2012 TAX UPDATE Scheduled Changes for 2013… • The following are changes set to occur without further congressional action… • Tax Bracket Changes set to sunset January 1, 2013 • 10% and 15% set to adjust to 15% • 25% set to go back up to 28% • 28% set to go back up to 31% • 33% set to go back up to 36% • 35% set to go back up to 39.6% • Long term capital gain rate set to go back to 20% (or 10% depending on income) on January 1, 2013 • “Qualified” dividend rate will rise to match standard income tax rates on January 1, 2013 • Estate & Gift tax exemption amounts sunset on January 1, 2013 • Top rate scheduled to increase to 60% • Exemption amount scheduled to shrink to $1 million • Note: The above list of items is not intended to be all inclusive.

  5. 2012 TAX UPDATE Income Tax Brackets… TAX PLANNING 2012 Individual Tax Brackets

  6. 2012 TAX UPDATE Michigan Tax Changes… • Governor Rick Snyder signed legislation on May 25, 2011 • Changes for 2012 and thereafter include: • Repealed the annual 0.1% rate reduction scheduled • 2012 tax rate is 4.33% annualized (reduction from 4.35% to 4.25% on 10/1/12) • 2013 and thereafter tax rate is 4.25% • Phases out personal exemption for higher income taxpayers • Phases out certain pension and retirement income subtractions based on birthdate • Repeals various tax credits previous available: • Donations to homeless/food bank, community foundations, and public charities • City income taxes paid • College tuition and fees • Changes the homestead property tax credit • Available only for homes with taxable value less than $135,000 • Phase-out based on “total household resources” from $41,000 - $50,000 • Repeals certain deductions (including political contribution & the $600 child 18 and under) • Repeals certain special exemptions (including for seniors) • Note: The above list of items is not intended to be all inclusive.

  7. 2012 TAX UPDATE 2013 and beyond…

  8. 2012 TAX UPDATE Tax Changes Discussed… • The following are changes that have been discussed… • Obama/Boehner Items Likely to be Discussed Further • Tax Rate Hike? (Those with MAGI > $250,000, $500,000, $1,000,000?) • Limitations for those above 28% Tax Bracket? (ie., up to 11.6% decrease in benefit) • Limitation on itemized deductions • Tax exemption on municipal bond interest • Tax exemption on employer provided health insurance • Limitation on deductibility of retirement account contributions • Joint Committee on Taxation Study Items • Taxation of state and local bonds • Elimination of certain itemized deductions • Mortgage Interest Expense • Charitable Contributions • Medical Expense • State and local income and property taxes • Cutback in personal exemptions • Repeal of alternative minimum tax (AMT) • Elimination of exclusion for retirement plan contributions • Elimination of exclusion of employer provided health insurance • Note: The above list of items is not intended to be all inclusive.

  9. YEAR END PLANNING Retirement & Gifting Limits… • Don’t miss the opportunity to invest for retirement while minimizing taxes.

  10. YEAR END PLANNING Other Considerations… Required Minimum Distributions (RMD’s) • Federal government requires minimum distribution for IRA participant upon age 70½ Capital Gains (or losses) • Sales of stock or mutual funds • Capital loss carryovers; allowable net loss of $3,000 per year • Capital gain distributions • Internal fund carryovers • Cost Basis Reporting to IRS • Stocks transactions posted on or after January 1, 2011 • Mutual Funds and dividend reinvestment plans on or after January 1, 2012 • Debt securities, options on or after January 1, 2013(now postponed until January 1, 2014) • Cost Basis Reporting Alternatives • Raymond James default will be FIFO (First-in, First-out) • Other Options – Average Cost, Specific Identification, High-Cost First-out (HIFO)

  11. YEAR END PLANNING Final Thoughts… TOP TEN LIST • 10) Make any last minute itemized deductions or other deductible payments. • 9) Contribute to 529 plans or other education accounts ($10,000 MI tax deduction). • 8) Consider donation of appreciated securities for charitable desires. • 7) Consider Roth IRA conversions in effort of maximizing tax exemption on earnings. • 6) Estate planning considerations including annual gifting ($13,000 annual exclusion). • 5) Consider municipal bonds for tax exempt income. • 4) Explore tax-loss AND/OR tax-gain harvesting. • 3) Max out retirement plan contributions and contribute early for 2013. • 2) Review, rebalance, and reallocate portfolio holdings. • 1) Work with your financial advisor and tax professional.

  12. Disclosure The information contained in this presentation has been obtained from sources considered reliable, but we do not guarantee that the material is accurate or complete. This material is for discussion purposes only and does not constitute tax or investment advice. Investors should consult a tax professional before making any tax planning decisions Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Income from taxable municipal bonds is subject to federal income taxation; and it may be subject to state and local taxes. Investments in municipal securities may not be appropriate for all investors, particularly those who do not stand to benefit from the tax status of the investment.

  13. Independent Registered Investment Advisor Raymond James Financial Services, Inc. QUESTIONS ? THANK YOU FOR ATTENDING! McFawn Financial Services Group, LLC 340 E. Big Beaver, Ste. 140 Troy, MI 48083 248-619-0090 Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC.

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