2013 Federal Tax Changes
These Power Point slides show the major effects of the expired payroll tax holiday, the new payroll taxes from the Affordable Care Act and income taxes related to the 2012 American Taxpayer Relief Act. Other than deferring income, there's not much that can be done to avoid the higher payroll taxes.
A new 3.8% Medicare tax applies to taxpayers who have modified adjusted gross income in excess of $200,000 (single filers), $250,000 (maried filing jointly) and $125,000 (married filing separately). This tax will cost $38 per $1,000 of investment income above those levels. Strategies to avoid this tax could include restructuring investment portfolios so they include more tax-free interest and/or investments in non-dividend paying stocks.
There's a new 39.6% tax bracket that applies to taxpayers with taxable income above $450,000 (married filing jointly), $425,000 (head of household) and $400,000 (single). Additionally, if your taxable income exceeds those thresholds, your capital gains will be taxed at a new 20% rate. Controlling the timing of receipt of wages and dividends and/or capital gains could enable you to avoid this tax bracket, and, therefore, the higher rates.
Certian taxpayers will be subject to limitations on itemized deductions and the personal exemptions. Single filers with adjusted gross income above $250,000, heads of households above $275,000, married filing jointly above $300,000 and married filing separately above $150,000 will be affected. By controlling the nature and timing of both your income items as well as your itemized deductions, you may be able to keep your adjusted gross income below those levels, thereby preserving the full benefit of your itemized deductions and personal exemptions.