While most tax practitioners are aware of the many tax changes that are effective for the 2013 tax year, many taxpayers may not be. You may be surprised to learn that the tax landscape has shifted precipitously for those who find themselves on the wrong side of a new divide between “middle class” and “higher earners.” These higher earners are now subject to an array of new taxes, higher rates, and stringent deduction limits.
Effective in 2013, new rules impose significantly higher taxes on higher earners, increasing the importance of tax awareness and tax planning. Under the Affordable Care Act and the American Taxpayer Relief Act of 2012, the following rules apply for tax years beginning after Dec. 31, 2012:
· Increased payroll tax for high-earning workers and self-employed taxpayers.
· Surtax on unearned income of higher-income individuals.
· Higher individual income tax rates apply to higher-income taxpayers.
· Capital gain and dividend rates rise for higher-income taxpayers.
· Personal exemption is limited for high earners.
· Itemized deductions are limited for high earners.
The definition of higher-income or higher-earning taxpayers is different for each of the above bullets. For single taxpayers, the changes take effect at thresholds ranging from $200,000 to $400,000. For married taxpayers, they take effect at thresholds ranging from $250,000 to $450,000.
For more information contact BNC National Bank today to discuss tax changes and options available to you.