Americans are still adjusting to the effects of the payroll tax increase, but these proposed 2013 tax changes could pack an even bigger financial hit.
That's because Washington is desperate for additional revenue streams.
To solve the problem, U.S. President Barack Obama and others have suggested closing some loopholes and altering deductions in order to reduce the budget deficit and avoid some of the automatic spending cuts.
Unfortunately, you probably benefit from some of these tax breaks right now.
Here's a breakdown of five tax deductions and loopholes that could be in danger.
2013 Tax Law Changes: Watch Out for These Hits
Some of the 2013 tax law changes slated to take effect Jan. 1 could hit your portfolio if you aren't prepared - and some will go into effect regardless of the fiscal cliff resolution.
In fact, the Internal Revenue Service (IRS) has released 159 pages of rules that will apply to trusts, annuities and individual equity traders.
One tax that could affect you is a new 3.8% surtax on investment income - or as it's fondly called, the investment income Medicare tax. The new tax is part of the 2010 healthcare reform law passed by Congress, and represents the first surtax on capital gains and dividend income.
There's also a new 0.9% healthcare tax on wages for high-income individuals; it is called the earned income Medicare tax increase.
Combined, these two taxes could raise an estimated $317.7 billion over the next decade, reported Reuters, based on a June Joint Committee on Taxation analysis.
To find out if you qualify for these taxes - and how to avoid them - check out this look at the proposed changes.
2013 Tax Law Changes: Medicare SurtaxThe 3.8% Medicare surtax is a big deal because it's the first time a Medicare tax will be assessed on investment income.
For the purposes of the rule, investment income includes the following:
- Interest, Dividends, Royalties, and Annuities
- Capital gains, including any profit you make on the sale of your residence if it exceeds the amount you are allowed to exclude
- Passive-activity income. This can defined as earnings that stem from rental property, limited partnerships or other business that an individual is not actively involved.
Your MAGI is the total of adjusted gross income plus any foreign income. So if you work in the United States, MAGI will equal AGI, which includes your net investment income (gains minus losses).
It's a bit tricky, though.
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