Las Vegas, NV – (March, 2013) Tax year 2013 is a mixed bag, and taxpayers should approach with caution, according to CPA Chris Wilcox, a partner with Las Vegas-based CPA firm, Johnson Jacobson Wilcox.
The increase in the top marginal rate for the wealthiest Americans (for individuals, those with income exceeding $400,000; for married couples filing jointly, those with incomes exceeding $450,000) from 35 percent to 39.6 percent has been well publicized.
But a new 3.8 percent Medicare tax, passed three years ago as part of the Affordable Care Act, got far less ink. The new Medicare tax, passed three years ago as part of the Affordable Care Act, means passive rental income is now considered investment income, along with capital gains, interest income and dividend income. All of these items of “investment income” are subject to the new 3.8 percent Medicare tax if your investment income is above $200,000 or married tax payers with investment income in excess of $250,000. Few have focused on the fact that the new law includes rental income in its definition of investment income. This means that the owner of a building will owe the 3.8 percent Medicare tax on the rental income. This tax is in addition to the regular tax, potentially resulting in a total tax on the rental income of 43.4 percent.
On the upside for homeowners, forgiven debt from short sales continues to be tax-exempt. And on the upside for businesses, Congress has extended provisions to let businesses expense up to $500,000 of equipment purchases during the year and deduct 50 percent of the cost of new equipment purchased during the year. These provisions may not last beyond this tax year, so if your business needs new equipment, now may be the time to buy.
About Johnson Jacobson Wilcox Certified Public Accountants and Consultants
Founded in 1995, Johnson Jacobson Wilcox is a firm that thinks way outside all those little boxes on a spreadsheet. It‘s their job to not only know their business and the “ins and outs” of clients’ businesses, but to also maintain an objective perspective so they can help them make strategic business decisions. To learn more go to www.jjwcpa.com.