We're talking about higher tax rates for upper-income taxpayers as well as a higher capital gains tax rate and a new investment surtax that was included in the Affordable Care Act.
"Between the increased tax brackets that went into effect in 2013, and the new 3.8% Medicare surtax on net investment income, many upper-income taxpayers are seeing a significant bump in their taxes," said Patricia Bojanic, certified public accountant and tax partner at Gordon Advisors in Troy.
"It's made tax and investment planning that much more important," Bojanic said.
Some higher-income households, she said, could end up seeing a 24% increase or more in the taxes on their investment income.
First, let's look at the new, little-understood 3.8% surtax that took effect in 2013.
Some taxpayers could be subject to an extra tax on net investment income. Investment income includes interest, dividends, royalties, rents, capital gains and passive activity income.
More people could be talking about the 3.8% surtax this season because of the relatively lower-income threshold, said Bernie Kent, chairman of Schechter Investment Advisors in Birmingham.
"This is the one new tax that applies to the most people," said Kent, who has worked more than 40 years with high-net worth individuals and families.
The 3.8% surtax would apply to married couples when modified adjusted gross income exceeds $250,000 if filing jointly and singles when modified adjusted gross income exceeds $200,000. The surtax would apply to married couples filing separately who individually earn more than $125,000.
On top of that, an added Medicare tax of 0.9% on gross income from wages and self-employment would be imposed on taxpayers earning more than $200,000 single or $250,000 for joint filers, too.
Alan Semonian, certified public accountant at Ame! ritax Plus in Berkley, said he has seen some higher-income households this season getting hit by the 3.8% surtax after receiving significant capital gains distributions from mutual funds.
One married couple, both physicians, had to report $50,000 in capital gains distributions from their mutual funds, he said. For that particular couple, the gains helped to trigger about $5,000 in extra taxes relating to the surcharge.
Mutual funds that aren't in tax-sheltered accounts, such as IRAs or 401(k)s, are required to pass profits from capital gains, interest or dividends to individual investors. You'd owe tax on that distribution, even if you did not sell off your shares in the fund.
The 3.8% tax does not apply to money taken out of a qualified retirement plan or IRA. It also does not apply to interest income from municipal bonds. Net investment income would not include wages, jobless benefits, Social Security benefits and alimony either.
Though there are not many ways to reduce this 3.8% tax hit in 2013, a few options can exist for some people who are slightly above the $200,000 or $250,000 thresholds, Kent said.
Kent noted that someone who works for an employer who doesn't provide a 401(k) plan or other type of retirement plan, such as a traditional pension, still could contribute now through April 15 for the 2013 tax year to a deductible IRA, which would reduce taxable income. For 2013, a taxpayer could contribute up to $5,500. Or someone age 50 or older last year, could contribute up to $6,500.
Someone who is self-employed could consider contributions to a Simplified Employee Pension IRA and that could reduce 2013 taxable income.
The way the 3.8% surtax is calculated can be a bit confusing. For example, a single person with $225,000 in modified adjusted gross income could face an extra tax of $950 if wages were $100,000 and net investment income, $125,000. The surtax in that case is applied to $25,000 of net investment income.
For those with even higher incom! es, more ! tax hits are taking place this year.
The highest tax rate jumps back to 39.6% for taxable income more than $400,000 for singles and more than $450,000 for married couples. That's up from 35%.
Investors in the top bracket now must pay 20% on long-term capital gains and dividends, instead of the 15% that most other taxpayers pay.
Higher-income taxpayers also face a potential phase out of itemized deductions and personal exemptions if their adjusted gross income is $250,000 or more if single or $300,000 or more for married couples.
James Jenkins, president of Jenkins accounting firm in Southfield, said self-employed business people are doing more planning. Many of these upper-income people, he said, "aren't accidentally rich" and they are not likely to just stand still as rates climb higher.
The real tax rate is closer to 44%, not 39.6%, for some higher-income taxpayers who have taxable income above the $450,000 threshold, Jenkins said.
"You know what a phase-out is? It's called higher tax rates," Jenkins said.
Contact Susan Tompor on Twitter @tompor
Gene J. Puskar/AP WASHINGTON -- U.S. home prices rose in January after three months of declines. A tight supply of homes might have helped boost prices and offset sales slowed by cold weather. Real estate data provider CoreLogic (CLGX) says prices rose 0.9 percent in January after slipping 0.1 percent in December. During the past 12 months, home prices have risen 12 percent, the biggest year-over-year gain in more than eight years. CoreLogic's price figures aren't adjusted for seasonal patterns, such as winter weather, which can depress sales. Snowstorms and low temperatures contributed to a sharp drop in sales of existing homes in January. The National Association of Realtors said sales plunged to their lowest level in 18 months. Still, the number of homes for sale remained low, a factor that might have helped increase prices. Home sales and construction have faltered over the winter, partly because the weather has likely discouraged many Americans from house-hunting. The average rate on a 30-year mortgage is also about a percentage point more than it was last spring, which means buying costs are higher. Most recent housing reports suggest that the market is slowing. Economists think the housing recovery could pick up once the spring buying season begins, though likely at a slower pace than last year. A measure of signed contracts was unchanged in February. Signed contracts usually lead to a finished sale in one to two months. And builders broke ground on 16 percent fewer homes in January than in December, the government said last month. That was the second straight decline. Other price gauges are falling. The Standard & Poor's/Case-Shiller 20-city home price index fell in December, the latest period for which data are available, and its year-over-year gain slowed. Nationwide, home prices are still 17 percent lower than at the peak of the housing bubble in April 2006, according to CoreLogic. Prices have set highs in three states: Louisiana, Nebraska and Texas. They are within 10 percent of their peaks in 19 additional states. The five states with the biggest price gains in January, compared with a year earlier, were Nevada, where prices rose 22.2 percent; California, 20.3 percent; Oregon, 14.3 percent; Michigan, 13.7 percent; and Georgia, 13.4 percent. Mississippi was the only state to report a price decline.
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