3.8% SURTAX

3.8% SURTAX ON INVESTMENT INCOME The outcome of the "fiscal cliff" is unknown; the 3.8% surtax on investment income is a sure thing: IMPACTS THOSE WITH INVESTMENT INCOME TAX RATES ON DIVIDENDS AND LONG-TERM AND AN ADJUSTED GROSS INCOME OF: • • • s200,000+ s250,000+ CAPITAL GAINS WILL RISE 15% 18.8% 'Investment income subject to the surtax includes 'merest, dividends, royaltces, rents, and capft THE FISCAL CLIFF: WHERE DO YOU FALL? If lawmakers fail to act before January 1, 2013 and address the pending "fiscal cliff," $7 trillion worth of tax increases and spending cuts will go into effect. While the entire scenario is larger than what's pictured here, these are some key impacts to the average American: AMT PATCH, WILL NOT BE RENEWED income exempt from the Alternative Minimum Tax in 2012, filed in 2013, decreases (with exemption amounts adjusted for inflation). If 550,600 578,750 • • 533,750 545,000 RESULTS IN 30+ MILLION PEOPLE HIT BY THE "WEALTH" TAX itittittitt flit ititttittri w 2011=4M WWWWWWWITT BUSH TAX CUTS' The Bush tax cuts are ALL set to expire December 31.2012. INCOME TAX RATES WILL RISE ESTATE TAX PARAMETERS REVERT TO PRE-2001 LEVELS The exemption level falls from SS million to St million and the top rate on taxable estates rises from 35% to 55%. i Exemption 15% 28% 31% 36% 39.6% level * * * * * 10% 15% 25% 33% 35.0% Tax rates CAPITAL GAINS RATE INCREASES FOR MOST FILERS QUALIFIED DIVIDEND RATE RISES TO ONE'S TOP INCOME TAX RATE up from 15% for most filers 2012 = 30+ M Note: a bipartisan bill from the Senate Finance Committee proposes a patch for 2012 and 2013 but it has not passed the Senate or House yet. 15% •sil • PEP/PEASE LIMITATIONS RESTORED High-income households may not be able to take some itemized deductions and personal exemptions in full. 5 M 35% 55% 1M EXPANSION OF ELIGIBILITY FOR THE EARNED INCOME TAX CREDIT EXPIRES MARRIAGE PENALTY RELIEF EXPIRES LOW- or middle-income two- earner couple will owe more to the IRS than they would if they were single making the same income. CHILD TAX CREDIT DECREASES AND THE REFUNDABLE PORTION REDUCED • .P1 * $1,000/child 5500/child ' Investment News, "Nine Issues Driving the Fiscal Cliff," FREW I3009999/PH6tParams= Itemnr=9 Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Croup'. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds. While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal' are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. WE'LL GIVE YOU AN EDGE' MM5925 1 08/2012 I t1209I302d2 EFTA00306824