Remember all the talk after the 2012 election about tax hikes? Well, they’re here–but you’re probably going to be affected only slightly, or not at all, if you are earning less than six figures. However, once you get above $200,000 of total income, you’re almost sure to see a hike in your tax bill this year.
The most significant increases affecting higher-income earners this year include:
–The new 3.8% Net Investment Income Tax on singles with modified adjusted gross income of more than $200,000 ($250,000 for joint filers.) As Brent Hunsberger of The Oregonian points out, this tax on investment income includes real estate income. Remember that real estate income is ordinary income, so this is a 3.8% tax on top of whatever your ordinary marginal tax rate already is. (Department of Shameless Self-Promotion–Hunsberger quotes Yours Truly in his article.)
–A Medicare Tax increase of 0.9% . You are subject to this if you have wages and/or self-employment earnings of more than $200,000; $250,000 for joint filers. Note: Because employers don’t know all of your sources of income, they cannot withhold this additional tax. You’ll be reporting it yourself on the all-new Form 8959.
–An increase in the top rate on long-term capital gains and qualifying dividends to 20%, instead of 15%. This hits people with taxable income above $400,000; $450,000 for joint filers.
–An increase in the top marginal tax rate, from 35% to 39.6%. Again, only the highest earners–people with more than $400,000 of taxable income, $450,000 for joint filers–are affected.
The biggest problem for folks who are affected by all of these increases? Maybe it’s figuring out where the few people are with whom you can commiserate. As this handy-dandy calculator from Kiplinger’s shows , people with adjusted gross income for $400,000 or more are in the top 1% of income earners nationwide.