skip to Main Content

Thought You Avoided the Taxman in 2013? Think Again- New Taxes that have Nothing to do with the Taxpayer Relief Act of 2012

Suppose you’re a couple making $325,000 a year and you have a healthy portfolio of $1 million between savings, investments and retirement accounts. Towards the later part of 2012, you probably assumed that you were in the group of folks making over $250,000 who would be subject to higher income and capital gains taxes as the fiscal cliff approached. Low and behold (and to your delight), when the legislation to avoid the “fiscal cliff” was made known, it appeared that tax increases would only affect joint filers with taxable income over $450,000 and individuals over $400,000. So 2013 probably won’t look much different for you than 2012… right? Unfortunately, no… it will.

What taxpayers under the $400k and $450k thresholds may be ignoring are the taxes associated with the Affordable Care Act which were signed into law well before the fiscal cliff negotiations. First, there is the 3.8% Medicare Surtax applied to investment income. This tax is applied to interest, dividends, capital gains and other passive income. The threshold where this tax kicks in is the lesser of net investment income or total income over modified adjusted gross income (MAGI) of $250,000 for couples filing jointly or $200,000 for individuals. So, for our couple in the $325,000 income range, the lesser of their net investment income or the $75,000 over the $250,000 threshold, would be subject to this new tax.

What about wages? Well, even if your tax bracket didn’t go up, you may be subject to an additional 0.9% Medicare payroll tax on earned income in excess of $250,000 for joint filers and $200,000 for individuals. For married couples, it’s important to aggregate the earned income of both individuals to see if the 0.9% additional payroll tax will be applicable. For instance, if two married individuals each earned $150,000, while they would not be subject to the additional payroll tax individually (less than the $250k threshold), once you aggregate their earned income, they would now be subject to the additional 0.9% tax.

So 2013 may indeed include new and perhaps forgotten taxes to account for. Check out these articles with more specifics on the Medicare Surtax and the Taxpayer Relief Act. As always, work with your Wealth Manager and your accountant to determine how tax changes may affect your overall financial plan.

 

Important Disclosure Information

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases. RegentAtlantic does not provide tax advice. Please remember to consult with a tax professional to discuss the implications of these changes on your personal situation. The information in this article is based on RegentAtlantic’s current understanding of tax legislation. Congress may change this legislation at any time.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

Back To Top