Wealthy Taxpayers are Now Paying More in Taxes

Taxpayers having incomes that exceed 97% of all the other taxpayers' incomes are being hit with some new taxes for 2013.

Many of them (not my cients - they were all informed) are just finding out about these new tax hits as they prepare to file their 2013 tax returns.

First, the special reduced rate of tax for capital gains has been bumped up to 20% (from 15%) for married couples with incomes over $450,000 ($400,000 for singles).

Second, Medicare taxes are being increased from 1.45% to 2.35% on wages in excess of $250,000 for married taxpayers ($200,000 for singles).

In addition, there is a new 3.8% Medicare tax on investment income. This new tax applies to the lesser of: (a) taxable investment income or (b) the amount by  which their adjusted gross income exceeds $250,000 for married couples ($200,000 for singles). Investment income includes dividends, interest, rental income, capital gains and annuities.

Third, personal exemptions and itemized deductions for married taxpayers with adjusted gross incomes in excess of $300,000 ($250.000 for singles) are reduced. The "phase-out" of personal exemptions eliminates 2% of the personal exemption deduction for each $2,500 that adjusted gross income exceeds the $300,000/$250,000 thresholds. Itemized deductions are "phased-out" by reducing total itemized deductions by 3% of the amount adjusted gross income exceeds the $300,000/$250,000 thresholds. This reduction is limited to 80% of total itemized deductions.

- Mark S Gleason CPA
  www.lakes-cpa.com