By Christopher M. Lee, CFP®
Over the past couple of months we have fielded phone calls from clients who have owed money on their taxes – in some cases a lot of money. There are many different reasons why some people have paid more in taxes than in previous years. (Let me preface this by saying that I am not a tax advisor or a tax accountant – for your individual case you should always seek guidance from a tax professional). Later in this article I will list some tax tips that may help you reduce that check to Uncle Sam, but first let us look at what was different in your 2013 tax return from your 2012 return. Some of the biggest changes you may have not noticed in 2013 were:
- Payroll Tax: increase in the Social Security portion of the payroll tax from 4.2% to 6.2% for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”
- Top marginal tax rate: increase from 35% to 39.6% for taxable incomes over $450,000 ($400,000 for single filers).
- Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).
- Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).
- Tax rates on investment: increase in the rate on dividends and capital gains from 15% to 20% for taxable incomes over $450,000 ($400,000 for single filers).
Obamacare tax increases that took effect:...