Your taxes are going up. The 3.8-percent surtax on investment income, when combined with the expirations of the Bush-era tax cuts will move the highest marginal federal tax rate from 35 percent to 43.4 percent. The 3.8-percent surtax starts in 2013, and it only applies to those with modified adjusted gross incomes starting at $250,000 (married), $125,000 (married filing separately), and $200,000 (single). Meanwhile, lower brackets are only affected by the expirations of the Bush-era tax cuts. The resulting federal income tax brackets are shown below. The table does not reflect the 0.9 percent hospital insurance FICA tax on wages.
Net investment income, which is used to calculate annual income, does not include: tax-exempt bond interest; excluded gain ($250,000 individual; $500,000 joint) from the sale of a primary residence, Veteran’s benefits, distributions from IRAs/ Roths and qualified retirement plans; self-employment income; active trade or business income; any income derived from an active business; and gain on the sale of an active interest in partnership or S Corporation.