By Cathy Peters
There are several tax law changes effective for 2013 that should be taken into account when figuring your estimated tax payments or adequate withholding for certain high income taxpayers.
- Additional Medicare Tax of .9% on salary and/or self-employment income above $200,000 for single, head of household or qualifying widow with dependent child filers, on combined salary and/or net SE income above $250,000 for joint filers, and $125,000 for married individuals filing separately.
- Additional 3.8% “Net Investment Income Tax” if you have net investment income and have modified adjusted gross income over $200,000 for singles or heads of household, $250,000 for married filing jointly or qualifying widow with dependent child, or $125,000 for married individuals filing separately. Generally, net investment income includes interest, dividends, capital gains, rent and royalty income, income from businesses involved in trading financial instruments and businesses that are passive activities to the taxpayer.
- Itemized deductions and exemptions may be reduced if your adjusted gross income is over $250,000 for singles filers, $300,000 for joint filers, $275,000 for head of household, and $150,000 for married individuals filing separately.
- The maximum rate on income increases from 35% to 39.6% and the tax rate on long-term capital gains and dividends increases from 15% to 20% for single filers with taxable income of $400,000, $450,000 for joint filers, and $425,000 for head of household, and $225,000 for married individuals filing separate returns.