New Taxes for 2013: Paying for ObamaCare

In 2014, every person will be covered by affordable health care.  This will be provided by employers with more than 50 full-time employees or it will be provided by individuals having insurance on their own.  So how will the U.S. pay for this?  Through taxes…and it starts NOW!  There will be 2 main taxes charged to individuals who earn more than $200,000 per year.  Here is how it will work. Time for Taxes

 

Additional Medicare Tax:

In 2013 an additional .9% on person’s income:

  • $250,000 Married filing joint taxpayers
  • $125,000 Married filing separate taxpayers
  • $200,000 All other taxpayers (Single, HOH, QW)
  • Employers are required to withhold the .9%; disregard the wages of the spouse
  • If the employer fails to withhold, the employer is liable for the penalties

 

Example:  Mike and Mary – Mike is an employee earning $225,000.  His employer must withhold $225 ($25k x .009).  Mike’s wife Mary works part-time earning $20,000.  Mike and Mary will file jointly.  There will be no Medicare tax assessed since their income is less than $250,000.  The tax will be refunded with their return.

 

Net Investment Income Tax:

  • In 2013, taxpayers will be charged 3.8% tax on investment income
  • Tax is calculated when the tax return is done on a 1040 or 1041
  • The tax has the same income threshold amounts as above in the additional Medicare tax
  • Includes: interest, dividends, annuities, royalties, rents (not from trade or business), net gain of disposition of property 4797 (other than trade or business), gross income derived from trade/business that is a passive activity which the taxpayer does not materially participate
  • If you sell your personal home, it may be subject if the gain of the sale is over the $250/$500k exemption rule.  For example, if the gain = $540k, the tax is on the $40k

 

Example:  George – George is single and received $175,000 in wages and $60,000 in investment income = $235,000.  He is not subject to the .9% Medicare tax but he is subject to the 3.8% NIIT.  The tax is $35,000 ($235k earnings – $200k threshold) x 3.8% = $1330

 

If you are earning over $200,000 in 2013, is your employer withholding the .9% tax?  If you will not have wages over $200k, but will have other income that will put you over the threshold, plan to pay this additional tax at the time you file your tax return.  You may want to think about making an estimated tax payment or have your tax preparer do a projection so that there are no surprises on your 2013 tax return.

About Renee Daggett

Renee Daggett is the founder and President of Admin Books, Inc, a bookkeeping and tax firm. She is also the author of “Your Financial Flight Plan: Pilot Your Business To Profitability”. Renee lives her life with purpose and helps her clients find peace of mind as they achieve success in their businesses.

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