Tax Act Makes it Harder to Define Who’s Wealthy

The new American Taxpayer Relief Act will mainly affect the wealthy, experts say – but it also makes it difficult to define just what “wealthy” means.

The new hightest tax rate for individuals – 39.6% – affects married couples filing jointly whose income is $450,000 or more ($400,000 for individuals).

The phase-out of itemized deductions and personal exemptions is much lower – $300,000 for married couples, $250,000 for individuals.

For the 3.8% Medicare tax on net investment income, enacted a few years ago but coming into effect this year, the thresholds are $250,000 for couples and $200,000 for singles.

“With all these different thresholds,” said Jeffrey Blinn, a principal in the Tax and Accounting Department at the accounting firm MBAF, “Congress has made it very difficult to see what bracket you are in for unearned income, and that makes compliance much more complicated.”

To add to the confusion, he said, “these thresholds are not indexed for inflation, so over time more and more people will be caught.”

Getting around the 3.8% surtax on the wealthy is the largest concern for his clients, said Scott Berger, a tax principal with Kaufman, Rossin.

“They want to know to avoid being considered rich,” he said.

Continue reading this tax act article in Miami Today.