Medicare Surtaxes revisited

The end of 2013 is near, and its very likely that you, our clients, friends, and colleagues, are becoming more and more concerned regarding changes in taxes this year. We previously touched on this topic back at the beginning of this year on our blog here, but because of the impact it can make on your taxes, we thought it was good to talk about it again.

If you believe your family will be hit by the 0.9% medicare surtax on earned income, consider increasing your withholding. This tax kicks in at $200K for singles, and $250K for married couples. Employers must start withholding for the tax once your income exceeds the 200K threshold. However, in many cases, this extra withholding won’t kick in as a result of extra income from another source, whether it be a spouses earned income, or unearned income (more on this part later).

“Unearned income” will also be affected by the Medicare surtaxes.  This includes interest, dividends, capital gains, rental/royalty income, and other passive investment income. However, instead of only the 0.9% additional tax, it is 3.8%! Again, this tax only affects income over the 200K and 250K thresholds.

The short version of this story is, if you think you will be affected by either of these taxes, give us a call today. We can get some projections going for you to calculate where you will fall, and we can also discuss any strategies available to you in your specific situation that could lower your taxes overall.