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2013 tax increases

As part of the new health care law, there are some interesting tax changes going into effect next year. Here are a few:

  • Currently it’s possible to deduct medical expenses that are above 7.5% of your gross income for the year. So if you made $50,000 and spent $5,000 in medical expenses for the year, you could take $1,250 as a deduction. Starting in 2013, however, the 7.5% floor is jumping up to 10%. So in our example, you’d get no deduction that year. For taxpayers 65 and older, this change doesn’t go into effect until 2017.
  • For those higher income earners (>$200,000 single or $250,000 married), there are a couple of new Medicare surtaxes. One is an additional 3.8% tax on unearned income. For those with a lot of S-Corp income or capital gains, for example, this could be significant.
  • The other is a 0.9% tax on earned income. Again, you’d need a lot of income before this hits you, but it could be quite a hit if it does.
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