By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
2013 ushers in higher taxes
Federal rates expected to increase due to new taxes, rules
Placeholder Image

Even if Congress extends all or part of the so-called Bush income-tax cuts, most Americans still can expect to pay higher federal taxes in 2013 due to new taxes established by the Affordable Care Act and an end to a temporary payroll-tax reduction to the Social Security tax rate.
According to the Internal Revenue Service, the Affordable Care Act contains tax provisions that began in 2010, 2011 and 2012 and others that will be implemented in 2013 and 2014. Among the new taxes that take effect this year are a net investment income tax, additional Medicare tax health flexible spending arrangements and a medical device excise tax.
Laurence Weinhoff’s TaxSquad.com, a tax preparation and planning website, explains another provision of the Affordable Care Act will limit medical itemized deductions. According to Weinhoff, the threshold percentage for claiming out-of-pocket medical and dental expenses on Schedule A will increase from 7.5 percent to 10 percent of a taxpayer’s adjusted gross income.
According to www.irs.gov/uac, the net investment income tax includes a 3.8 percent tax on an individual’s investments and capital gains, estates and trusts above a certain threshold. Investment income includes but is not limited to interest, dividends, royalties, rental property and capital gains from real-estate sales, including home sales.
An additional .9 percent Medicare tax will apply to individual wages, Railroad Retirement Tax Act compensation and self-employment income that exceed a certain threshold. The income threshold is $250,000 for married couples filing jointly, $125,000 for married couples filing separately and $200,000 for all other taxpayers.
A new rule will limit health flexible spending arrangement contributions. The rule limits pre-tax salary reduction for health FSAs from $5,000 to only $2,500. The IRS website notes that the Treasury Department and IRS also are considering further changes to use-or-lose rules for health FSAs.
Another tax that may affect taxpayers in that extra fees could be passed on to them is a 2.3 percent medical device excise tax, which will be charged to manufacturers and importers of certain medical devices. According to the IRS website, a medical device is any device listed as a medical device by the U.S. Food and Drug Administration.
The website notes that some devices, such as eyeglasses and hearing aids, are exempt from the excise tax. The IRS website is unclear, however, about what medical devices will be assessed with the new tax.
According to www.finance.yahoo.com, the medical device industry expects the tax to have a major impact on future profits. The tax will reduce profits, and if the cost of the tax is passed on to consumers, it will affect sales, which also will affect profits and hurt consumers.
In addition to new federal taxes related to the implementation of the Affordable Care Act, American taxpayers will see a 2 percent increase in their Social Security tax withholding beginning in 2013. According to the Social Security website, Congress provided a temporary 2 percent cut in Social Security withholding in 2010 then extended it to the end of 2012. The combined Federal Insurance Contributions Act for Social Security and Medicare will return to 7.65 percent Jan. 1, 2013.

Sign up for our e-newsletters