The new law includes several tax increases. Starting in 2013, the Medicare payroll tax will go up from 1.45% to 2.35% of income for single taxpayers earning more than $200,000 a year (and couples earning more than $250,000). At the same time, people in these income levels will be hit by a new 3.8% Medicare tax on all dividends, capital gains and income from rental property. These new taxes will be applied in a way that most of us are not familiar with; if you earn one dollar over the threshold, the higher Medicare tax counts against your ENTIRE income, not just the income you earned over the threshold amount. And the extra Medicare tax on dividends, capital gains and rent is only applied to people with income above these threshold amounts; if your adjusted gross income is one dollar lower than the threshold, the tax doesn't apply to you--at all.
All I can say is W.O.W. is there any better way to make sure that a person with control over their incomes and dividend streams (small and closely held businesses, this is you) limits their income to 1 dollar below the amount than to apply the rates retroactively to their entire income stream? Stunning.
Prepare for a major 'dip' in reported wages, interest and dividends starting in 2014. I'm actually preparing a Comunicato script for investment advisors to share with their clients telling them precisely how to legally short the tax man.
These boys really don't understand how things work, do they?
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