The recently passed American Taxpayer Relief Act of 2012 and the health care reform law which was passed back in March 2010 have various tax increases on upper income earners. These tax increases are all effective in the 2013 tax year. The five major tax increases are an increase in the Medicare tax by 0.9%, applying a 3.8% Medicare levy to net investment income, reinstatement of phase outs for itemized deductions and personal exemptions, an increase of the dividend and capital gains rate to 20%, and an increase to the top income tax bracket to 39.6%.

To add confusion, many of these additional new tax schemes become effective at different income levels. The following graph.pdf and discussion lays out the tax and the income level which it kicks in.

0.9% Medicare surtax on wages ' This is a product of the healthcare reform law. It increases the Medicare tax imposed on wages by 0.9%. It applies to wages in excess of $250,000 for married couples. It applies to wages in excess of $200,000 for single filers. One should note that this applies to wages and not other forms of income. (Unfortunately, most other forms of income are addressed in the next bullet.)

3.8% Medicare tax applied to net income ' Medicare taxes have historically only been assessed against wages. Effective January 1, 2013, Medicare taxes will now apply to one's net investment income at a rate of 3.8%. Investment income includes: interest, dividends, capital gains, rental income, royalty income, and passive activity businesses. The tax is assessed on joint filers with a modified adjusted gross income (MAGI) over $250,000. For single filers it is assessed with a MAGI over $200,000.