January 1, 2013 brought massive changes to the individual income tax structure to wage and investment income earners. Taxpayers are now faced with a new maximum tax rate, higher rates on dividend and long-term capital gain income, a decrease in itemized deductions and personal exemptions, and even two new taxes that can hit income. A brief summary of these new taxes –
- Maximum tax rate of 39.6% (up from 35%) for ordinary income over $400,000 ($450k for married filing joint);
- 20% tax rate for qualified dividends and long-term capital gains (up from 15%) for those with gross income over $400,000 ($450k for married-filing joint);
- Phase-out of itemized deductions and personal exemptions for those with gross income over $150,000 ($300k for married filing joint);
- New 3.8% Medicare surtax on net investment income for those with gross income in excess of $200,000 ($250k for married filing joint); and
- New 0.9% additional Medicare tax on wages and self-employment income in excess of $200,000 ($250k for married filing joint).
If you find yourself facing a bigger tax bill, we can help. There are many strategies that can minimize your tax outlay and enhance your overall financial situation. Contact HBS CPAs for the kind of personalized, expert advice that will help put you on a sound financial footing.