Happy New Year! Now that the holidays are over, it’s time to get serious about reviewing where you stand from a tax perspective. As you may recall, in 2013 Congress and President Obama made a budget deal to avoid the fiscal cliff which resulted in seven tax increases. In addition to these increases, the introduction of the Affordable Care Act (also known as Obamacare) also included six additional tax increases, for a grand total of 13 new tax hikes which may affect your 2013 tax bill.
The following list details these tax changes. It is worthwhile reviewing it to see which changes are most likely to impact you this tax year:
- The payroll tax increased to 6.2 percent.
- The top marginal tax rate increased from 35 percent to 39.6 percent for taxable incomes over $450,000 for couples ($400,000 for single filers).
- Personal exemptions are being eliminated for taxpayers with adjusted gross incomes (AGI) of more than $300,000 ($250,000 for single filers).
- Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).
- The tax rate on dividends and capital gains has increased to 20 percent from 15 percent for taxable incomes over $450,000 ($400,000 for single filers).
- Taxpayers who file Married Filing Jointly with AGI of more than $250,000 ($200,000 for those filing as Single) will see an additional 3.8 percent surtax on investment income and another payroll tax hike of 0.9 percent.
- The "Death Tax" rate was also increased on estates larger than $5 million from 35 percent to 40 percent.
- For businesses, the full expensing of investments will expire to be replaced by the immediate deduction of capital purchases.
- Another payroll tax hike of 0.9 percent for the Hospital Insurance portion of the payroll tax will affect those with incomes over $250,000 ($200,000 for single filers).
- The new medical device tax means that a 2.3 percent excise tax on all sales will be paid by medical device manufacturers and importers.
- The medical expenses income tax deduction for individuals will be reduced.
- The corporate income tax deduction for expenses related to the Medicare Part D subsidy is now eliminated.
- The corporate income tax deduction for compensation that health insurance companies pay to their executives has been limited.
Do any of these 13 tax increases apply to you or your business? If you need help determining how these changes will impact you, please contact our office for assistance.