Tax season is officially underway, and despite promises of “no new tax law changes for 2014”, you still might be in for a few surprises. Here’s a quick summary.
As United States citizens begin collecting and filling out their paperwork they may notice that something very different is occurring in 2014. Despite the bevy of “no new tax law” promises that always occur prior to the start of a new tax season, politicians are still finding new and interesting ways to require greater payments. If you want to avoid being completely surprised or taken aback by what is waiting for you and your W2’s, you’re going to have to stay informed.
The first thing to realize is that the top tax rate for tax payers is up to 39.6%. Rates have not been this high since 1999, over 15 years ago. All of President Bush’s tax cuts have reached their expiration date, ushering in horrendous tax rates for the twentieth century. Yet, how much money does that percentage actually represent? The 39.6% tax rate begins at an overwhelming $400,000 for individual tax payers and an even grander $450,000 for married couples who file jointly.
While the fact that all wages will be subjected to Medicare tax won’t change, now tax payers who earn $200,000 – $250,000 for couples filing jointly – will also undergo Medicare surtax. This means that an additional 0.9% will be tacked onto the Medicare tax, effectively increasing the payment costs for those in the proper earning bracket. Even if you don’t make it into the relevant category to receive this surtax, there are still plenty of other new changes that will affect you.
Net Investment Income Tax
For example, you might still need to contend with the NIIT, or Net Investment Income Tax, if you have both net investment income and modified adjusted gross income of at least $200,000 (again, $250,000 married couples). This includes the taxation of items such as interest, dividends, capital gains, rental and royalty income, and certain income from businesses. However, It does not touch on wages, unemployment compensation, Social Security Benefits, alimony, self-employment income, and a select few other specific sources.
This is only a small sample of what you will face this tax season, so prepare to encounter some unexpected changes. If you are still lost or confused about tax law changes for 2014, several companies offer assistance for tax preparation in Philadelphia including ourselves. Don’t get caught off guard when it comes to receiving or paying the appropriate amount of taxes. Staying informed is the most important thing you can do, so find out everything you need to know from an expert today.
We’re always happy to help.