ON THE HORIZON


2013 Tax Effects Be ready for changing tax rates now and in the next few years


BY RICHARD BELL GuestWriter


After a lot of debate, news coverage and


confusion - new tax laws have been put in place for 2013 and beyond. In the past several weeks, our firm has received a lot of questions regarding these changes and how they will affect business owners and individuals. Tax changes are almost never simple to understand. A brief overview of some of the broader points should help you form an idea of the effect of the new changes. The current Federal tax system has four


main elements: an income tax on individuals and corporations (consisting of both a regular income tax and alternative minimum tax); payroll taxes on wages or self-employment income to finance social insurance programs; estate, gift, and generation-skipping taxes; and excise taxes on selected goods and services. Let’s look at some of the most recent tax


law changes for a broad overview of how it will affect you in the future tax years.


INDIVIDUAL INCOME TAXES INCREASED To understand what tax rate and income


levels you are subject to, you must first understand that not all income is taxed the same. Earned income — wages and salaries, earnings from self-employment, trade or business income, rental income with active participation (think of this as income generally derived from the work you do and not from investments you have made) — is subject to the highest level of tax at 39.6 percent beginning in tax year 2013 for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other rates of 10, 15, 25, 28, 33 and 35 percent remain the same as in prior years, with the 35 percent bracket having only a few thousand dollars spread before jumping into the new 39.6 percent bracket. Your


6


accountant can give you the specific income breakdown for each of the rates. So long as your taxable income does not exceed $400,000, you will continue to pay a similar amount of tax as in prior years.


CAPITAL GAINS & DIVIDENDS TOP RATE CHANGED Since the Bush-era, the top tax rate on


income derived from passive-investment type activities (i.e. publicly traded stock, bonds, derivatives, etc.) was maxed at 15 percent unless you were in the 10-15 percent income tax bracket, in which case it was zero. For tax years beginning in 2013 forward, however, the top tax rate on capital gains, dividends, and interest income is now 20 percent IF you fall within the highest income tax bracket (i.e.


married taxpayers who file a joint return with taxable income of $400,000 or more). This additional “bump” in rates, will impact more of the affluent retired population.


AFFORDABLE HEATHCARE ACT (A.K.A. OBAMACARE) Additionally, there is a new 0.9 percent


Medicare tax on earned income above $200,000 ($250,000 for married couples filing jointly). If your paycheck or self employment income is over these thresholds, your employer is required to increase your Medicare withholdings by 0.9 percent. You employer is not required to take into account your spouse’s paycheck, but you may request additional federal withholding be taken out to cover the tax liability that will ultimately be


ROADWISE | ISSUE 1, 2013 | www.mttrucking.org


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16