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IF YOUR AGI IS OVER $200,000, BE PREPARED TO PAY MORE
Many tax law changes taking place at the end of 2011 and 2012 will result in certain taxpayers paying considerably more in income taxes in future years. Don’t be misled by the term “millionaire’s tax”. This has been pretty much defined in current tax law such as the Health Care and Education Reconciliation Act of 2010, the Patient Protection and Affordable Care Act, and various other proposed tax bills in the Senate, all of which institute new taxes for married filing joint taxpayers having an adjust gross income of more than $250,000 not $1,000,000, and adjusted gross incomes of more than $200,000 for all other filers.
The above two acts call for an increase of 3.8% tax on unearned income such as interest, dividends, annuities, royalties, rents and capital gains, as well as an additional 0.9% tax on earned income for married joint filers with adjusted gross income over $250,000 ($200,000 for all others). Additionally, the Bush tax cuts (The Economic Growth and Tax Relief Reconciliation Act of 2001) are set to expire at the end of 2012 with an increase in the rates across the board up to a high of 39.6% as during the Clinton years. Dividends will no longer be taxed at capital gain rates (which incidentally will increase from 10% to 15%) and will be taxed at ordinary income rates. Personal exemption and itemized deductions will be phased out for individuals with high adjusted gross incomes. As a result many economists are projecting increases ranging from 27 to 30% on certain taxpayers in 2013. Is there any wonder why some in Congress are yelling “No More Taxes”?
Short of a change in existing tax law it is almost certain we will be paying more in taxes in future years. We urge that you consider the potential impact of the above and make changes in your withholding levels in future years and modify your lifestyle accordingly.
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