The Rich Will Pay More Taxes No Matter What - Spokane, North Idaho News & Weather KHQ.com

The Rich Will Pay More Taxes No Matter What

Posted: Updated:

YAHOO.COM - The rich will pay more in taxes next year regardless of the outcome of the fiscal cliff. That's because two new taxes enacted to fund President Obama's health care reform are kicking in come January.

The new levies will help foot the bill for the program to expand health care coverage for the uninsured, which involves government subsidies for lower- and middle-income Americans.

The vast majority of taxpayers will escape unscathed, however. Fewer than 2% will be subject to the new taxes, said Roberton Williams, a senior fellow at the Tax Policy Center.

Here's what's coming:

Medicare payroll tax: Single taxpayers earning more than $200,000 and couples making more than $250,000 will have to pay an additional 0.9% payroll tax on the amount they earn above those thresholds.

Unlike traditional payroll taxes, however, this tax will be based on household income, not individual earnings. So couples may find themselves subject to it even if they each make less than $250,000.

That could lead to a surprise at tax time since employers withhold payroll taxes only on their own workers.

For instance, if a husband and wife each earn $175,000, they will owe the additional tax, but their employers likely will not have withheld it. So they will owe $900.

Investment income tax: Wealthier taxpayers with investment income could be subject to an additional 3.8% levy. Investment income includes interest, dividends and capital gains, among other things.

The formula is somewhat complicated. Only those with modified adjusted gross incomes above a threshold of $200,000, or $250,000 if married, need be concerned.

But filers don't always owe tax on all their investment income. It's just on the investment income that exceeds the threshold.

For example, if a married couple has income of $300,000, of which $275,000 is from wages and $25,000 is from investments, they would owe the tax on all the investment income, or $950 in taxes.

But if the same couple had $125,000 in investment income, they would owe tax only on $50,000, or $1,900 in taxes, because that's the amount that exceeds the threshold.

Deduction for medical expenses: Also, it will become harder to deduct medical expenses, though this deduction is more common among middle class taxpayers.

Until now, taxpayers could deduct medical expenses that exceeded 7.5% of their adjusted gross income. This level is rising to 10% next year.

One-third of the people who took this deduction had income in the $50,000 to $100,000 range in 2010, according to a CNNMoney analysis of Internal Revenue Service data. Only a tiny fraction of the rich took advantage of this deduction because their high incomes made it hard to reach the threshold.

  • Most Popular StoriesMost Popular StoriesMore>>

  • PHOTOS: Priest Lake lots heading to auction

    PHOTOS: Priest Lake lots heading to auction

    Thursday, August 28 2014 11:58 AM EDT2014-08-28 15:58:24 GMT
    PRIEST LAKE, Idaho - On Thursday, 61 cottages sites on Priest Lake will be auctioned off in Coeur d'Alene beginning at 1:00pm. >>
    PRIEST LAKE, Idaho - On Thursday, 61 cottages sites on Priest Lake will be auctioned off in Coeur d'Alene beginning at 1:00pm. For years, those already living on the sites leased the land from the State of Idaho, but now the State is looking to sell. Residents already living on the sites can bid to buy them back, however many have told KHQ they are preparing for their last few days at the lake.>>
  • Priest Lake Auction: Saying goodbye to home

    Priest Lake Auction: Saying goodbye to home

    Wednesday, August 27 2014 10:50 PM EDT2014-08-28 02:50:23 GMT
    PRIEST LAKE, Idaho - After years of obstacles for 61 Priest Lake lot lessees, the end comes on Thursday, August 28th. >>
    PRIEST LAKE, Idaho - After years of obstacles for 61 Priest Lake lot lessees, the end comes on Thursday, August 28th. People who have been leasing land from the state, some more than 40 years, will find out if they get to keep their property in an auction.Back in 2010, the State of Idaho decided to divest more than 300 lake lots on Priest Lake.
    >>
  • VIRAL VIDEO: Tribute to Robin Wililams at the Emmy's

    VIRAL VIDEO: Tribute to Robin Wililams at the Emmy's

    Thursday, August 28 2014 11:46 AM EDT2014-08-28 15:46:43 GMT
    KHQ.COM - If you missed the Emmy's on Monday night, you missed a great tribute to Robin Williams. Billy Crystal paid tribute to his friend and the man that filled millions of homes with laughter saying, "It's very hard to talk about him in the past because he was so present in all of our lives.">>
    KHQ.COM - If you missed the Emmy's on Monday night, you missed a great tribute to Robin Williams. Billy Crystal paid tribute to his friend and the man that filled millions of homes with laughter saying, "It's very hard to talk about him in the past because he was so present in all of our lives.">>