Ten Small Cities to Start a Business in 2023
Are you starting a new business? Have you thought about where you would like to start a business? Learn more about the best small cities to start a business.
With all the talk of restructuring our tax code from the current administration, the great debate of who feels the brunt of the tax burden has surfaced once again.
Taxes have always been a sensitive issue in conversation. Everybody has an opinion on the principle: some side with the desire to reduce taxes, some feel the tax code is out of date, others feel as if the current code only helps the wealthy demographic. With all the talk of restructuring our tax code from the current administration, the great debate of who feels the brunt of the tax burden has surfaced once again.
There is no doubt that the current tax code has loopholes. Clever accounting practices can go a long way in reducing one’s taxable income. Because the wealthy are the most likely to have the means to outsource tax research, and therefore legally attempt to limit their taxes, they are at the center of the debate. Are wealthy Americans facing their fair share of the tax burden? Below are six taxes that only the wealthy have to pay.
39.6% tax rate on ordinary income
We are all familiar with the standard tax rates on ordinary income: 10%, 15%, 25%, 28%, 33% and 35%. But what about the maximum rate for those high-income earners? For individuals and heads of households making more than $418,000 of taxable income a year, their tax rate is an astonishing 39.6%.
0.9% Medicare surtax on salary and self-employment income
This surtax can result in a higher federal tax rate for people with large taxable income. The tax is applicable if your income exceeds $200,000 if you use single or head of household filing status, or $250,000 if you are a married joint-filer.
20% rate on long-term capital gains and dividends
This rate is applicable at the same taxable income threshold as the 39.6% for ordinary income.
3.8% medicare surtax on net investment income
High-income earners also see a Medicare surtax on net investment income. Like the 0.9% Medicare surtax on salary and self-employment income, this can result in a higher than the expected tax rate on all or part of your capital gains, dividends, interest, rental income, and income from passive business investments.
Hidden tax due to personal and dependent exemption deduction phaseout
Higher income earners can see their personal and dependent exemption deductions greatly diminished or possibly eradicated due to a phaseout starting in 2017. This is for modified adjusted gross income of $261,500 for singles, $287,650 for heads of households, and $313,800 for married joint-filing couples.
Hidden tax due to itemized deduction phaseout
Another phaseout rule could reduce the number of write-offs for mortgage interest, state and local income and property taxes, charitable contributions, and miscellaneous itemized deductions by 80%.
Are you starting a new business? Have you thought about where you would like to start a business? Learn more about the best small cities to start a business.
Your filing status is perhaps the most important piece of information when it comes to tax withholding. Learn which filing status applies to you.
How often should you submit a new W-4? What is your filing status? In this article, we break down some of the most common W-4 questions.