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
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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