February 17, 2014
Article by Maury Cartine, Partner-in-Charge of Marcum's National Alternative Investment Industry Group Tax Department, "Increased Tax Rates and the Net Investment Income Tax – A Galactic Collision of Forces," Featured on AllAboutAlpha.com
By Maury Cartine
Researchers predict that the Andromeda Galaxy will collide with our very own Milky Way Galaxy in approximately four Billion years. When that happens, life on Earth will be eliminated for certain. “So what”, you say with a smile. Well, time sneaks up on all of us and as 2013 becomes only a memory, investment managers and investors will face a tax collision of galactic proportions on their 2013 income tax returns.
Last year at this time we were all warned that we would begin to feel the full weight of Obamacare and a budget that is simply out of control. Now as investment managers and investors face the prospect of paying income tax balances due for 2013 and estimated tax payments for 2014, the increased tax burdens will become a reality. A simple analysis of what has happened to upper middle income taxpayers should bring that reality into focus. The analysis illustrates the effects of the 2013 increase in federal income and employment taxes on married taxpayers filing joint returns with the same income and itemized deductions for 2012 and 2013.
In the first illustration, the married taxpayers are assumed to have $600,000 of income comprised of wages in the amount of $200,000, qualified dividends in the amount of $100,000 and long-term capital gains in the amount of $300,000.