How the tax law changes that became effective on January 1, 2013 will affect you will depend upon the amount of income you earn.
If your income is $200,000/$250,000 (single/married filing jointly (MFJ)) or less, there are no significant changes to your income tax treatments. Your ordinary income, capital gains and dividend rates will remain the same.
For those who earn more than $200,000/$250,000 (single/MFJ), an additional Medicare tax of 0.9% will apply to wages or self-employment income about this dollar threshold. An additional Medicare tax of 3.8% will apply to the lesser of the individual’s unearned income (primarily investment income) for the year or the modified adjusted gross income (MAGI) in excess of the $200,000/$250,000 threshold.
For those who earn more than $250,000/$300,000 (single/MFJ), all the changes for those earning more than $200,000/$250,000 (single/MFJ) apply to you, PLUS your personal exemptions and itemized deductions begin to phase out.
For those who earn more than $400,000/$450,000 (single/MFJ), all the changes discussed above apply to you, PLUS an additional marginal rate of 39.6% will apply to ordinary income above this dollar amount PLUS the qualified dividend rate increases from 15% to 20% PLUS the capital gains rate increases from 15% to 20%.
Individuals who find themselves in one of the above income level tax increases should meet with their financial advisor and tax professional to evaluate their investments and financial goals. Perhaps appropriate tax-advantaged and tax-deferred investments are something that should now be considered.
Note: Because each individual has unique needs and because tax laws are subject to change without notice, we invite you to call 610-594-2601 today to make an appointment to discuss your tax and financial strategies for 2013 as well as to meet your retirement goals.
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