New Tax Surprises For This Year

We recently received an email from someone who was concerned about new tax surprises and how they would be affected.

Now a days not only do we have to question the accuracy of what we come across on social media and emails, we even have to be careful about what we see and hear in main stream media.

The email that was forwarded to us turned out to be mostly a recirculation of primarily false and misleading information that's been going around since 2014, or even earlier. But it is worth reminding you about the so-called new tax law changes; in case you hear about them, we want you to have the full story. Here they are:

  • The Medicare tax has increased from 1.45% to 2.35%. Technically this is true, but only for high income earners who make over $250,000 if married or $200,000 if single. In this case, income is earned income, not pensions, social security or capital gains.
  • The top income tax bracket has increased from 35% to 39.6%. This is true, but it occurred back in 2013, so shouldn't really be a surprise to anyone this year.
  • Capital gains tax went from 15% to 28%. This is false. Capital gains went from 15 to 20%. If you include the net investment income tax of 3.8% for high income earners then capital gains taxes could be as high as 23.8%.
  • Taxes on dividends increased from 15 to 39.6%. Again, this is false. This is comparing the tax rate on qualified dividends at 15% to non-qualified dividends taxed as ordinary income at the highest tax bracket.
  • The estate tax has gone from 0 to 55%. Again, this is false. Rates went up to a maximum estate tax of 40% assuming there is a taxable estate. In 2016, the state tax exemption is $5.45 million. For a couple the estate tax exemption is close to $11 million.
  • A 3.5% real estate transaction tax has been added. This is false. It may be is making reference to the 3.8% tax on net investment income for high income earners.

Now here's the really interesting fact behind this e-mail – the sender.

It turns out the sender is currently under investigation by the SEC for mismanaging monies in a hedge fund they are promoting. And this isn't the first time they've run into troubles with the SEC. Several years ago they were barred from working in the securities industry.

The next time you see something in your email, on social media or now a days even by mainstream media, always make sure you check the facts or have someone do it for you before you lose any sleep over it, or even worse, take any kind of action.