It could be 43.4%! In comparison, the top rate in 2010 is 35%.
Starting in 2011, the top federal income tax rate increases from 35% to 39.6% as legislation enacted by the Bush administration expires. In addition, effective January 1, 2013, a provision in the recently enacted health care legislation imposes an additional 3.8% Medicare tax on unearned income (taxable interest, dividends, capital gains, rents, royalties and other non-wage income). The top 39.6% rate PLUS the 3.8% additional Medicare rate leaves a top enacted rate of 43.4% for 2013.
The highest income tax rate for 2011 (39.6%) begins when taxable income exceeds roughly $375,000. The 3.8% Medicare tax (again, scheduled to start in 2013) applies when adjusted gross income exceeds $250,000 for married couples and exceeds $200,000 for single persons.
Married couples with taxable income of $500,000 in 2013, of which $300,000 is wages and $200,000 is “unearned” income, would pay about $13,500 MORE federal tax in 2013 than in 2010.
We would be happy to meet with you to discuss strategies to combat these currently enacted increases in income tax rates as well as other aspects of your income tax planning.
In accordance with IRS Circular 230, no information in this article is considered a “covered opinion” or other written tax advice and cannot and should not be relied upon for IRS audit, tax dispute, or any other purpose.
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