It’s official – tax season is here! The IRS started accepting tax returns at the end of last month.

Whether you have a tax professional prepare your tax return or you complete it yourself, new tax laws will make this year and the next couple of years more complicated and challenging to say the least. Obamacare, as the new healthcare law is commonly referred to, has added yet another layer of income taxes to our system. Someone has to pay for it, right?

Take for example income earners who fall into the Adjusted Gross Income (AGI) camp of over $200,000 (if you are single) or $250,000 (married filing joint). Your tax bill has the potential to increase significantly, even if all else remained the same as last year.

One way you might see an increase is if you have investment income. Starting in 2013, you will owe an additional 3.8% tax on your net investment income or the amount that is over the above AGI limits, whichever is less. So, for example, if you are a single taxpayer and your AGI was $275,000 and you had net investment income of $50,000, you would owe and additional $1,900 ($50,000 x 3.8%).

Another increase could occur if you have wages of over $200,000, because your employer will be required to start withholding an additional .9% for Medicare taxes on the amount over $200,000. If you are married and you and your spouse earn over $250,000 combined, you will owe the additional .9% Medicare tax on the amount over $250,000. This additional tax will be computed when you file your tax return. So, as an example, if you earned $195,000 and your spouse earned $145,000, you would owe an additional $810 in Medicare taxes ($340,000 – $250,000 threshold = $90,000 x .9% = $810). If you are married and know that your combined wages will be over the $250,000 threshold, you can have your employer withhold additional federal income taxes to make up for the shortfall.

Also back are the personal exemptions and itemized deduction phase outs. If you are single and have an AGI over $250,000 or married filing joint and your AGI is over $300,000 you will be subject to reduced deductions. While the exemption deduction can be phased out to zero, your itemized deductions will generally not go below 80% of your total deductions.

Keep in mind that if you make estimated tax payments throughout the year, these estimates will also be higher due to your increased tax bill.

I am a believer that you do not let taxes dictate your investment decisions. However, if your AGI is high enough that you will be paying these additional taxes, you should pay closer attention to your investments in any taxable accounts and hold more tax efficient assets where possible. Also, anytime you can tax a tax loss, you should think about doing so when you are rebalancing your investments. Even if you can’t take the entire tax loss in the current tax year, you can always carry it forward to use in future years. These are some of the tax strategies we use to assist our clients here at Bloom Asset Management.

You have been warned, so don’t be surprised if you owe more taxes come April 15th. Good Luck!