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Phillip S. Winslow, CPA 1910 Olympic Boulevard, Suite 325 Walnut Creek, CA 94596 Phone: 925.932.1655 Fax: 925.256.6526
Phillip S. Winslow, CPA 1910 Olympic Boulevard, Suite 325 Walnut Creek, CA 94596 Phone: 925.932.1655 Fax: 925.256.6526
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Tax benefits of home ownership

Mortgage interest paid on the home loan is tax deductible, and most of the mortgage loan payments in the early years will go towards interest. For many taxpayers, their combined federal and California tax bracket is between 25% and 33%. That means that between one-fourth and one-third of mortgage interest paid is a dollar-for-dollar reduction in your tax bill. Generally, the borrower must be on title on the loan, and the loan must be secured by the home. read more

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Additional Medicare taxes in 2013

As part of the "Affordable Care Act" (ACA) of 2010, two new additional Medicare taxes become effective on January 1, 2013. These additional taxes are 1) a 0.9% tax on "earned income," and 2) a 3.8% tax on "investment income."

The 0.9% additional Medicare tax applies to earnings from wages and other taxable compensation, such as tips, bonuses, and noncash taxable fringe benefits, over a threshold amount. It also applies to net earnings from self-employment over the same threshold amount that depends on filing status. The tax applies to earnings over:

  • $200,000 for singles, heads of households, and qualifying widow(er)s
  • $250,000 for married filing jointly
  • $125,000 for married filing separately

For married couples, the imposition of the new tax on excess earnings is in opposition to basic Medicare tax rules. Under the basic Medicare tax rules, each individual pays the tax on his or her earnings. For purposes of the additional Medicare tax, it is imposed on the combined earnings of both spouses. Thus, even though each may have earnings below $200,000, which is the threshold for singles, if their combined earnings exceed $250,000, the threshold for joint filers, the tax is applied to the excess of their combined earnings. read more