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New Taxes in 2013: What You'll Pay

Medicare taxesThe New Year's Day compromise on the fiscal cliff was designed to prevent massive tax increases from taking effect that many feared would devastate the economy. Yet even with the compromise, several new taxes in 2013 will raise tax bills for millions of Americans, and the groups that are the most affected by the changing of the calendar may surprise you.

Here's a list of new taxes that took effect as of Jan. 1:

Payroll Taxes: Returning to Old Levels

For the past two years, just about everyone who has a job got a tax break of 2 percentage points on the Social Security taxes withheld from their paychecks. But on Jan. 1, the rate of tax withheld from employee paychecks rose from 4.2% to 6.2%, representing about a $1,000 tax increase for typical families earning $50,000. Already, anyone who's received a paycheck in 2013 has likely seen the impact of this tax, with those who get paid twice a month having about $40 extra taken out under the FICA on their paychecks.

Few analysts expected the fiscal cliff negotiations to extend this tax break further. But given that it hits at just about everyone, it could have the biggest impact of any of the new taxes in 2013.

Medicare Surcharge

High-income earners will see a brand-new tax this year. Single filers earning more than $200,000 and joint filers with income over $250,000 could be subject to two new taxes.

With one tax, if your earned income goes above the threshold, then you'll owe an extra 0.9% of your earnings in Medicare withholding. In some cases, this additional money may be taken directly out of your paycheck, although for joint filers, your employer may not be able to do so accurately because it doesn't know what your spouse earns in order to get the calculation correct.

The second tax applies to investment income, including interest, dividends, and capital gains. For this income, you'll owe an extra tax of 3.8% for any amount that exceeds the threshold. The idea behind this part of the new tax is to treat investment income for high-income earners the same way as earned income, making both types of income subject to the same higher Medicare tax rate.

New Tax Brackets and Rates for High-Income Earners

The biggest news from the fiscal cliff compromise was the return of the 39.6% tax rate for singles earning more than $400,000 and joint filers with income above $450,000. This rate is a carryover from the old rate structure that existed before the tax cuts of the early 2000s and represents a 4.6 percentage point rise from the old 35% rate.

In addition, taxpayers whose earnings are above these thresholds will see their taxes on dividends and capital gain income rise from 15% to 20%. Given that dividend rates could have risen as high as the 39.6% ordinary income tax rate, investors were fairly pleased with the eventual outcome.

Disappearing Deductions and Other Hidden Taxes

In addition to the explicit increases in taxes, some old provisions are back that will have the same tax-increasing impact. In particular, two separate rules that phase out certain deductions for high-income taxpayers came back this year after having been absent from tax law since 2009.

The phase-outs target two areas: personal exemptions and itemized deductions. One rule, known as the PEP, reduces the value of your personal exemptions by 2% for every $2,500 in additional income you earn over thresholds of $250,000 for singles and $300,000 for joint filers. The other rule, called the Pease phaseout, cuts the amount you can claim in itemized deductions by 3% of the amount of additional income you earn over those same thresholds, subject to a maximum reduction of 80% of your itemized deductions.

Those calculations are a bit complicated, but the net result is that you can end up paying thousands of extra dollars in taxes by losing the value of those deductions.

Finally, the estate tax rate rose from 35% to 40% this year. With the $5 million exemption made permanent, however, the impact of the tax will be limited to far fewer families than would have paid tax without the fiscal cliff compromise.

Start Planning

These new taxes for 2013 won't make anyone happy, but by knowing about them early on, you can start planning for them right away. Doing so may not let you reduce your tax bill too much, but it'll at least get you prepared for the hit to your paycheck and your tax refund next year.

The article New Taxes in 2013: What You'll Pay originally appeared on Fool.com.

For more tax information and advice, visit The Tax Center on DailyFinance.

Fool contributor Dan Caplinger appreciates your comments. You can follow him on Twitter @DanCaplinger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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We were told that our taxes were NOT going to go up. Obama said he "saved" the middle class. REALLY? We don't make anything NEAR 250K a year and our taxes have already gone up almost 2 grand. (we make WAY under 100K) You LIED Mr. Obama.

February 04 2013 at 6:18 PM Report abuse rate up rate down Reply

So to sum up, the article is saying spend less and put less back into the economy because the crooks in government want more of the money you worked for so they can spend more.

February 04 2013 at 3:26 PM Report abuse +1 rate up rate down Reply

Obama is not truthful and is not transparent but why should all his lies bother us? Just keep paying until there are no more of us to bleed to support the minorities who love to vote for Obama. Romney was a bigger bum and the entire Congress is corrupt. Solution: we vote all of them out at re- election time. We send honest non - politicians to Washington for ONE term and then without getting rich they go home to their real jobs. We keep doing this until we have honest citizens in Congresds. At present every oneof the bums we send to washington are bought and paid for prior to arriving in D.C. Corparations own these bums and they could care less about you and I. When you stop all the sillyness about Dems and GOP you will have figured it out they are all the same- bad actors, most should be in a federal prison. You send thesame bums to Washington over and over- they steal from us and hurt us. These are professional politicians who live their lives in Washington not in your state. Please wake up before we loose our wonderful country. Where do you think Obama got his traing and from who Chicagos very corrupt mayors Daily and the Illinois machine. Only four of their governors have gone to prison it should have been a lot more.

February 04 2013 at 12:38 PM Report abuse +1 rate up rate down Reply
Mike Kuhne

3) SEND IN #2

January 31 2013 at 12:20 AM Report abuse +3 rate up rate down Reply

Surprise liberals. You voted for more taxes and now you're going to get it in the wallet.

January 31 2013 at 12:06 AM Report abuse +3 rate up rate down Reply

Thank you Mr Predsident.

January 30 2013 at 11:56 PM Report abuse +1 rate up rate down Reply
1 reply to uc1912's comment

some day he will be gone and go down as one of the worst who spoke a good game.

February 04 2013 at 3:27 PM Report abuse rate up rate down Reply

Just look at the absolute lunacy of just these 2 or 3 things! Then imagine the whole tax code! WHAT STUPIDITY!!!

January 30 2013 at 11:25 PM Report abuse rate up rate down Reply

It's only the high income that is getting taxed more...doesn't affect me

January 30 2013 at 10:49 PM Report abuse -1 rate up rate down Reply
4 replies to Janet's comment

What did that LIAR Obama say: "No one making less that $250,000 will see any increase in taxes, not payroll tax, not income tax, not any taxes.." Well I suggest you check you pay stubs and what your federal taxes were last year asd what they are this year.. Check your Social Security taxes, also up.. Hell I might as well not have gotten a raise last year... As a matter of fact I make less money this first month of 2013 than I made the last month of 2012.. On the same amount of hours worked.. The government is jacking us all...

January 30 2013 at 10:46 PM Report abuse +5 rate up rate down Reply

we have to pay for obamie's friends

January 30 2013 at 9:55 PM Report abuse +4 rate up rate down Reply