Thursday, June 27, 2013

Increased Taxes Are Here

In addition to the change in estate and gift tax provisions made as a result of the passing of the American Taxpayer Relief Act of 2012 by Congress as mentioned in this post, the Act also increased taxes on certain income tax provisions, including but not limited to federal income tax rates, capital gains tax rates, and dividend tax rates.

Individuals with taxable income of $400,000.00 per year or $450,000.00 per year for a married couple on a joint tax return will experience higher income taxes in several areas:
  1. The top marginal tax rate on income will increase to 39.6% up from 35%.
  2. The top marginal tax rate on long term capital gains will increase to 20% up from 15%.
  3. The top marginal tax rate on on dividends will increase to 20% up from 15%.
Most people reading this will think after looking at these income levels, that this does not concern them and will never affect them. They think the above applies only to the "1%" and they are just one of the regular folks. However, many people come to find it a surprise that the above tax rules, in fact, does affect them without ever realizing it before when they plan to sell their investment property. This is especially true with real estate being as expensive as it is in New York City.