As with every other year, business owners around the United States have to learn about the new business tax changes that will come into effect for 2014. When learning about these amendments to tax laws, it’s important for you to understand that not all of these changes will directly impact your particular business. Some of these tax modifications will only effect people in the highest tax brackets while others may actually be helpful to your business. Either way, it’s advisable to take some time to learn about these changes so you can prepare your taxes accordingly.

Federal Income Tax Increase

As of the 2014 tax season, the federal income tax rate for businesses and individuals earning $400,000 or more jumped from 35 per cent to 39.6 per cent. This is the highest base rate that can be applied to income in the United States. Of course, it should be made clear that the 39.6 per cent is not set in stone as there are many tax credits and benefits that can be applied for depending on a number of different circumstances. Marginal increases may apply to businesses and business owners in lower tax brackets, but it depends on a number of factors.

New Medicare Tax

For businesses that are heavily involved with investments, there is a new tax on the books that you need to know about. It’s known as the “Medicare Investment Tax” and it applies to all investment income you make throughout the year. The tax is 3.8 per cent of the total income made through investments and it is added onto the new capital gains rate that was passed down this year. Last year, capital gains tax held steady at 15 per cent. This year, the capital gains tax has risen up to 20 per cent not including the Medicare tax. With the Medicare tax applied for investment income, the total capital gains tax liability of the average business will be 23.8 per cent.

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