Every year, it’s a sure bet that there will be changes to current tax law, and this year is no different. From standard deductions to health savings accounts and tax rate schedules, here’s a checklist of tax changes to help you plan the year ahead.
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Individuals must pay an additional 0.9% Medicare tax on earned income above certain thresholds. The employee portion of the Medicare tax is increased from 1.45% to 2.35% on wages received in a calendar year in excess of $200,000 ($250,000 for married couples filing jointly; $125,000 for married filing separately). Employers must withhold and remit the increased employee portion of the Medicare tax for each employee whose wages for Medicare tax purposes from the employer are greater than $200,000. There is no employer match for this additional Medicare tax. Therefore, the employer’s Medicare tax rate continues to be 1.45% on all Medicare wages. An employee is responsible for paying any of the additional 0.9% Medicare tax that is not withheld by an employer. The additional tax will be reported on the individual’s federal income tax return. Because the additional 0.9% Medicare tax applies at different income levels depending on the employee’s marital and filing status, some employees may have the additional Medicare tax withheld when it will not apply to them (e.g., the employee earns more than $200,000, is married, filing jointly, and total annual compensation for both spouses is $250,000 or less). Continue reading →