As summer quickly passes and we head into the last half of 2013, it is a good time to evaluate your income and deductions for the year and begin working with your CPA on planning strategies to reduce your overall tax burden.
Specifically, upper income individuals should be aware of the additional Medicare Tax which applies to earned income (wages and self-employment income). Prior to this new tax provision beginning in 2013, any wages paid to you by your employer were subject to a 2.9% Medicare payroll tax, which was split equally by you and your employer (1.45% each). Beginning in 2013, wages above $200,000 for individual tax filers, or $250,000 for married taxpayers filing jointly, will be subject to an additional .9% Medicare tax.
For illustrative purposes, this would mean that if you and your spouse file a joint tax return and have combined wages of $350,000, you will end up paying an additional $900 in Medicare taxes. Employers are required to withhold this additional tax for employees with wages in excess of $200,000, and any underpaid or overpaid Medicare taxes will be adjusted for on your income tax return. Individuals with both wages and self-employment income aggregate their earned […]