We have all heard the news stories of the inactivity of our government to act on the soon to be expiring tax cuts. There is a possibility of the tax rates to increase as high as 43.4% on ordinary income and 23.8% on long term capital gains, depending on your particular tax situation. On top of that, millions of taxpayers will be charged the Alternative Minimum Tax (AMT) because the patch that was put in place is set to expire also. As well as the 2% increase that all employees will face in their paychecks if the expiring payroll tax cut remains unaltered.
The new Medicare surtax is soon to come. Starting in 2013, the surtax will be 3.8% of net investment income will apply to certain individuals, trusts, and estates. The tax will be imposed on the lesser of the individual’s net investment income for the tax year or modified adjusted gross income in excess of those thresholds below.
- $250,000 for married taxpayers filing jointly
- $200,000 for taxpayers filing single or as a head of household
- $125,000 for married taxpayers filing separately
That’s not all, though. In addition to the above Medicare surtax, there will also be a surtax of 0.9% to wages and self-employment income of the same taxpayers with income in excess of the limits listed above.
Consider strategic planning for timing of income and investments. Consult your accountant to set up tax planning. Every tax situation is unique and the only way to predict what may happen for you this tax season is to “crunch the numbers”.