The outcome of the election will affect domestic and foreign policy to be sure. Many have heard about how in 2013 historically low gift and estate taxes will revert to pre-2010 levels. However, 2013 could bring more surprises to your wallet. Here are some surprises to anticipate.
Unless Congress acts income tax rates will increase. Currently, the lowest tax rate at the federal level is 10% and that would be increased to 15%. Additionally, for married taxpayers who earned between $58,900 and $70,700 during 2012 … the tax bracket would increase from 15% to 28%. For single taxpayers earning more than $85,650 and married taxpayers earning more than $142,700, the tax rates will all increase by a minimum of 3% with the highest rate jumping from 35% to 39.6%.” For more information click here.
There will be a new Medicare tax. Under current law, wages are subject to a 2.9% Medicare tax, with individuals and employers paying 1.45% each. However, with the implementation of the additional Medicare tax, individuals whose income exceeds a threshold amount will have to pay an additional 0.9% Medicare tax on wages in excess of the threshold. As a result, in 2013, the top Medicare tax rate for individuals will be 2.35% (1.45% plus 0.9%) for wages above the threshold. There is no corresponding Medicare tax increase for employers. For more information click here.
Medicare investment on investment income will become due. The Medicare Contribution Tax will be levied on net investment income and higher-income bracket trusts, estates, and individuals. A taxpayer will be required to pay 3.8 percent of the lesser of the taxpayer’s net investment income, or the amount by which his or her modified adjusted gross income exceeds $250,000 (for a couple filing a joint return), $125,000 (for married individuals filing separate returns), and $200,000 (for all other individual taxpayers). Net investment income includes interest, dividends, annuities, royalties, rents, capital gains, and passive activity income. For more information click here.
Social Security tax cuts will end. The temporary 2% cut in the employee Social Security tax rate is scheduled to expire on December 31, 2012. The current 4.2% rate will revert back to 6.2% unless it is extended in federal legislation. For more information click here.