Taxpayers around the land have been quite worried about the tax changes now in effect for 2013. According to recent Fox Business reports, there is confusion and even panic surrounding what has been implemented.
For instance, the word on the street is that individual taxes have risen by 2 percent due to Federal Insurance Contributions ACT (FICA) and Medicare rate hikes. A friend of mine shared this information with me the other day and was practically in convulsions as she spoke. I didn’t quite know how to respond, as I wasn’t sure as to which tax brackets would be subject to the change. I decided to educate myself on the matter, and this is what I have discovered:
1. Individual Tax Rates & Alternative Minimum Tax
It is fact that individual tax rates have increased. If you make $450,000 or more, you will be responsible for a 39.6 percent tax rate. The $450,000 also applies to small businesses that bring in $450,000 or more. According to North Georgia Accounting Consultants, the alternative minimum tax is projected to be $85,750.
2. FICA & Medicare
The Federal Insurance Contributions Act (FICA) has jumped to 6.2 percent will be applied to the first $133,700 of your income. Medicare will also see an increase of 2.35 percent for 2013 for those making $200,000 or more.
3. Medical & Dental Expense Deductibles
If you are less than 65 years old in 2013 and own your own business, you are only allowed to deduct medical and dental expenses that exceed 10 percent of your adjusted gross income. In the case that you are 65 or older, you will be provided the 7.5 percent AGI limit.
Other important areas of concern for many Americans are their investments. According to The Motley Fool, investments under $400,000 will continue to pay 15 percent. However, larger investments will likely be taxed at 20 percent.
Estate taxes (also known as death taxes) will also rise from 35 percent to 40 percent, which was the previous taxation level prior to the Bush Era tax cuts.
4. Curious as to how Obamacare will change things up?
The following are a few of the most notable effects:
– 3.8 percent surtax on investment income for those with an income over $250,000
– 2.3 percent medical device tax paid by medical device manufacturers & importers
– Elimination of the corporate income tax deduction for expenses related to Medicare Part D subsidy
There is more to the 2013 taxation story, a quick Google search will reveal great information from Forbes, The Motley Fool, and The Wall Street Journal. Experts from each of these entities suggest that when in doubt, you should always consult a professional tax expert.