Some Bad Things Coming

When you file your 2013 tax return there may be some unhappy surprises for some of you. There are 4 major tax increases related to Obamacare funding and 2 high income tax rate increases which affect 2013. The 4 Obamacare tax increases are the .9% Medicare tax on earned income, the 3.8% tax on investment income (interest, dividends, capital gains, rents, and passive income), personal exemption phase out, and itemized deduction phase out of up to 80%. The 2 high income tax increases are the new 39.6% rate and the 20% capital gain rate which affect taxable income of $400,000 single and $450,000 joint. The 3.8% and the .9% tax kick in at $200,000/$250,000 adjusted gross income single and joint. The phase outs of itemized deductions and exemptions start at the $250,000/$300,000 adjusted gross income single and joint. Note that the 4 Obamacare taxes are based on adjusted gross income where the 2 high income tax changes are based on the more favorable taxable income. Note also the marriage penalty built into the new thresholds. The joint threshold isn't even close to being double the single threshold. You may want to check your tax withholding before year end to see if you are withholding enough to cover these new taxes.