New Year and New Taxes for 2013

1/9/2013 - By Lisa Fairbanks,CPA

Even if you are not one of the individuals whose taxes will not be raised by the so called "fiscal cliff" legislation, wage earners and self employed persons will see a 2% tax increase effective January 1, 2013. Congress did not extend the payroll tax holiday that has been effect for the two past years which reduced Social Security FICA tax from 6.2 to 4.2 percent (Self employed 12.4 to 10.4%).

In addition, the new Obamacare taxes include both the 3.8 Percent Net Investment Income (NII) Tax and the 0.9 Percent Additional Medicare Tax which are effective January 1 for joint filers with incomes over $250,000 or single filers with incomes over $200,000. The 3.8% NII is an additional tax on investment income over the $250,000/$200,000 thresholds. Net investment income includes interest, dividends, royalties, net rents, annuities, other passive income, and dispositions of capital gains. Wages are not subject to the 3.8% NII tax, however, wages above the same $200,000/$250,000 thresholds are subject to the 0.9 percent additional Medicare Tax.

The fiscal cliff legislation increases the income tax rates from 35 to 39.6 percent for single filers earning more than $400,000 a year and joint filers earning more than $450,000. Capital gains will rise from 15 percent to 20 percent for taxpayers earning more than the $400,000/$450,000 thresholds. In addition, personal exemptions will start to phase out at $250,000 income levels and itemized deductions will start to phase out at $300,000 income levels.

Call our offices today at (800) 477-7458 and let a Saltmarsh tax professional help you navigate these changes and be sure you have adequate federal withholding or estimated tax payments for 2013. Happy New Year!

-Lisa Fairbanks, CPA