We can’t avoid it. The discussion is everywhere. I’ve debated it. I’m sure you have, too. The hot topic of today is the current deficit situation. The Democrats’ solution to cut the deficit is to generate additional revenue by raising taxes. On the other hand, Republicans want to reduce spending.
However, with all of this rhetoric, people are forgetting something…taxes are going up in 2013 whether Congress acts or not.
Here are three examples of what is to come:
- Bush Tax Cuts – Currently these are set to expire at the end of 2012. Beginning in 2013, the highest tax bracket will increase to 38.9% from the current 35%.
- Medicare Payroll Taxes – Thanks to ObamaCare, a new tax was created for wage earning individuals making more than $200,000 (and couples making more than $250,000) to kick in an additional 0.9% on wages above that amount.
- Investment Income Medicare Tax – This new 3.8% tax will affect taxpayers whose “modified adjusted gross income” wages, plus investment income, top $200,000 for individuals or $250,000 for couples. The tax will apply to whichever is less: investment income or the amount by which modified adjusted gross income exceeds the income threshold. Investment income will include taxable capital gains, dividends, interest income, annuities, royalties and rental receipts.
Much like the current alternative minimum tax, both of the new Medicare taxes will not be indexed for inflation. So they’ll include an increasing number of taxpayers over time.
On a positive note, there are ways of avoiding some of these taxes through current planning and using different retirement vehicles. Contact us to discuss how we can help lower you taxes in the coming future.