Greetings!
What do you do after the Broncos break your heart? Why not talk about paying taxes? Let's look at recent changes in tax laws, including the Medicare Tax and additional Medicare Tax.
Social Security benefits depend upon the credits paid into the system. Medicare benefits do not. If your overall financial plan includes receiving Social Security Income (and why not?), then you might be more comfortable contributing to the Social Security system. You (and/or your spouse) have to pay the Social Security system to get your Social Security Income. At least you can see a trade-off.
Medicare is a different story. You don't have to pay into the Medicare system to get Medicare benefits. You are forced to contribute 2.9% to Medicare whether you want to or not in FICA payroll taxes.
In 2013, the Additional Medicare Tax went into effect. On every dollar you earn above the following thresholds, you must pay an additional 0.9% tax.
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FILING STATUS
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THRESHOLD
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Married Filing Joint
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$250,000
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Married Filing Separately
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$125,000
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Single
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$200,000
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Head of Household (with qualifying person)
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$200,000
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Qualifying Widow(er) with Dependent Child
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$200,000
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If you are Single with taxable income of $300,000, then your additional tax burden is $900.
If you are Married Filing Joint with the same income then your additional tax burden is $450. (a)
Consult with your tax professional if you have questions about how these new tax laws affect your situation.
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| Weekly Economic Update | |
NEW YEAR, NEW LAWS AFFECTING YOU Singles earning more than $200,000 and couples earning more than $250,000 will face a 3.8% Medicare surtax and a 0.9% increase in Medicare payroll tax. Tax rates on dividends and long-term capital gains remain at 15% for most, but have risen to 20% for the wealthiest. A scheduled 2% cut to Medicare spending has been delayed until at least March. Social Security recipients will see benefits rise 1.7% this year. (1,2,3)
HUGE CHANGES AHEAD FOR HOME LOANS
Last week, the Consumer Financial Protection Bureau presented new rules for the mortgage industry - rules that will ban teaser-rate mortgages and "liar loans" in 2014. Next year, no legal protection will be available for banks offering interest-only or negative-amortization loans, and restrictions will prevent lenders from originating mortgages with balloon payments and severe upfront points and fees. Banks will also be barred from offering mortgages with a payment-to-income ratio exceeding 43%, though FHA/VA loans or mortgages backed by Fannie Mae or Freddie Mac could be exempt from this restriction. (4)
JACK LEW NOMINATED FOR TREASURY SECRETARY
The former hedge fund manager and current White House chief of staff has strong ties to Wall Street, which worries some members of Congress. Still, opposition to the nomination does not seem to be widespread. If confirmed, Lew could start his new job in late January, when Timothy Geithner is slated to leave the post. (5)
A SECOND STRAIGHT WINNING WEEK
The S&P 500 settled at 1,472.05 Friday, up 0.38% in five trading days. The Dow rose 0.40% last week to 13,488.43, while the NASDAQ gained 0.77% to settle at 3,125.63. The CBOE VIX fell 3.33% on the week to go -25.80% YTD. (6,7) |
| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+2.93 |
+8.35 |
+1.40 | |
NASDAQ |
+3.51 |
+15.30 |
+5.62 | |
S&P 500 |
+3.22 |
+13.89 |
+1.01 |
(Source: cnbc.com, usatoday.com, treasury.gov, treasurydirect.gov -01/11/13). Past performance is no guarantee of future results. Indices are unmanaged, and investors cannot invest in them directly. |
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Create a beautiful week!
Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
Citations:
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| Words for Thought |
"Always forgive your enemies. Nothing annoys them so much."
Oscar Wilde |
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Riddle of the Week
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It has avenues, rivers and parks - but no grass, water or asphalt. What is it?
Last week's riddle:
You serve it, but you can't eat it. You hold it, only to smash it. Sometimes love is involved when you use it. What is it?
Last week's answer:
A tennis ball. |
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