Colin Anderson/Getty Images
39.6% top tax rate
Before the tax law was changed in 2012, the highest possible tax rate was 35%. The signing of the American Taxpayer Relief Act into law bumped the top tax rate up 4.6 percentage points.
Higher-income individuals now face a possible 39.6% tax on their wages, also known as ordinary income, once they exceed a certain threshold.
The income triggers are indexed for inflation. For the 2015 tax year, for example, married couples' combined income must exceed $464,851 to be taxed at the top rate. In 2016, the earnings amount goes to $466,951.
RATE SEARCH: Need a personal loan? Get matched to the best loan for you!
20% capital gains tax rate
On the investment side, wealthier taxpayers also will pay higher taxes.
The previous top capital gains rate was 15% on profits from assets held for more than a year before selling. That long-term capital gains tax rate applied to taxpayers whose income fell into the 25% or higher tax bracket.
The American Taxpayer Relief Act changed that. Now individuals whose income is in the top tax bracket -- that 39.6% tax rate -- will face a 20% capital gains rate on profits from long-term asset sales.
All short-term capital gains, those from sales of assets held for a year or less than a year, continue to be taxed at your ordinary income tax rate, regardless of which tax bracket your income falls into.
© Monkey Business Images/Shutterstock.com
0.9% added payroll tax
A provision in the Affordable Care Act calls for an additional 0.9% Medicare payroll tax on wage income over certain thresholds. This is on top of the 1.45% Medicare tax for which taxes already are withheld.
Employers must withhold the added tax when a single taxpayer's income exceeds $200,000. This income level also applies to head of household and qualifying widow/widower taxpayers.
Married taxpayers who file joint returns face the added tax when their combined income exceeds $250,000. The income limit is $125,000 if married filing separately.
The added Medicare tax also applies to self-employment earnings. And the earnings thresholds are not indexed for inflation, so more individuals could face the tax as their incomes increase over the years.
You can't have extra tax withheld specifically for the 0.9% levy. However, any excess income tax you have withheld applies to any taxes -- including the new Medicare portion -- you owe on your Form 1040. Estimated tax payments also can help cover the new tax.
Conversely, if your employer withheld the added tax because you made more than $200,000 but your combined income with your spouse does not meet the $250,000 joint filing threshold, you'll claim credit for any excess Medicare tax when you file your return.
RATE SEARCH: In the market for a new home? Compare mortgage rates on Bankrate.com today!
© Galina Tcivina/Shutterstock.com
3.8% net investment income tax
The health care reform law also tacks a 3.8% tax on wealthier taxpayers' investment income. This net investment income tax, or NIIT, applies to taxable capital gains, dividends, interest, rental income and annuities, among other types of income.
The income thresholds are more than $125,000 for a married taxpayer filing a separate return; $200,000 for single or head of household filers; and $250,000 for married couples filing jointly and qualifying widows or widowers with a dependent child. Again, these income limits are not indexed for inflation.
Once you reach your earnings threshold, you figure your NIIT amount. Your first step is determining the amount on which to apply the 3.8% tax. It's either your annual net investment income or the amount that your modified adjusted gross income, or MAGI, exceeds your income threshold. To get your MAGI, you add back certain items you deducted to reach your adjusted gross income.
The good news is you use the lesser of the 2 amounts. Take, for example, a married couple with MAGI of $400,000 and net investment income of $200,000. Their income is $150,000 more than their $250,000 income threshold; that's less than their investment income. So this couple owes an NIIT of $5,700 ($150,000 x 3.8 percent).
© Graham Prentice/Shutterstock.com
Reduced deductions, exemptions
Wealthier taxpayers also have to do extra math to figure out how much of their personal exemptions and itemized deductions they will lose. The American Taxpayer Relief Act reinstated the phaseout of these tax reduction amounts, again based on adjusted gross income.
The trigger thresholds are more than $154,950 if married filing separately in 2015 ($155,650 in 2016); $258,250 if single in 2015 ($259,400 in 2016); $284,050 if head of household in 2015 ($285,350 in 2016); or $309,900 if married filing jointly or a qualifying widow/widower in 2015 ($311,300 in 2016).
Personal exemptions -- $4,000 each for yourself, spouse and any dependents for the 2015 tax year; $4,050 in 2016 -- help reduce adjusted gross income to a lower taxable income amount. This amount is reduced incrementally once a rich taxpayer's income exceeds the filing status income trigger amount. The personal exemption phaseout, or PEP, could zero out the exemption amounts for some taxpayers.
Wealthier taxpayers who itemize also could lose some of the value of common deductions, such as mortgage interest, state and local taxes paid and charitable donations. When their income hits the earnings level trigger for their filing status, they must make a series of Schedule A calculations to determine their reduced itemized deduction amount.
Unlike the exemptions phaseout, the itemized deductions cannot be completely eliminated. However, they could be reduced enough to cause wealthier filers some tax pain.