Today we will review some tax rate changes and new taxes for the 2013 tax year.
A new top individual tax rate of 39.6% is imposed on taxable income over $400,000 for single filers and $450,000 for married taxpayers filing jointly.
The personal exemptions and itemized deductions phase-out is reinstated at a higher threshold of $250,000 for single taxpayers and $300,000 for married taxpayers filing jointly.
A 20% rate applies to capital gains and qualified dividends for individuals above the top income tax bracket threshold.
Beginning in 2013, individuals, trusts, and estates who have adjusted gross income in excess of certain amounts will face a Medicare surtax of 3.8% of net investment income. This new tax only applies to married couples filing jointly with Modified Adjusted Gross Income in excess of $250,000 or $200,000 for single taxpayers. For estates and trusts the amount is approximately $12,000.
A second Medicare surtax applies to wages and self-employed income. Beginning in 2013, the employee portion of the Medicare tax increases from 1.45% to 2.35% on wages in excess of $200,000. That’s $250,000 for married couples filing jointly and $125,000 for married couples filing separately. The additional 0.9% Medicare tax is also imposed on self-employed income that exceeds these thresholds.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.