Tags: Wealthy | tax | increase | 2013

Tax Pros: Wealthy Filers May Suffer 'Sticker Shock'

Thursday, 26 Dec 2013 08:03 PM

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Tax increases implemented this year for people with annual incomes of more than $400,000 will create an average tax bill hike of 7 percent, says Joe Perry, a partner who oversees tax services for accounting firm Marcum LLP.

The increase will snare about 1,200 of Marcum's clients, who together will pay a total of $250 million in additional taxes, he told CNBC. And not everyone is ready for it, Perry says. "People are aware of the changes, but I don't think they are prepared for the changes."

The income tax rate for those with incomes above $400,000 was increased this year to 39.6 percent from 35 percent. At the same time, the tax on long-term capital gains and qualified dividends for the same wealthy group were raised to 20 percent from 15 percent.

Editor’s Note: See Sean Hyman Explain His Biblical Money Code for Investing

Some tax deductions were phased out for people with annual income of more than $250,000. And a 3.8 percent investment surtax will be charged on taxpayers with annual income of more than $200,000.

So how should taxpayers deal with the new rule? "You have to plan for a two-year period," Perry said. And if you're coming up against a payment threshold, you'll want to decide whether to accelerate income into this year or defer it to next year, he says.

Other experts, too, warn the wealthy to be ready for higher tax bills.

"High-income taxpayers have tax increases coming at them from multiple directions," Tim Steffen, director of financial planning at Robert W. Baird in Milwaukee, told The Baltimore Sun.

"It's going to be some real sticker shock for them when they start looking at their tax returns a few months from now."

Editor’s Note: See Sean Hyman Explain His Biblical Money Code for Investing

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