High Income Taxpayers

High-Income Taxpayers

In addition to higher federal tax rates, taxpayers whose in-come exceeds certain levels may have reduced or eliminated tax deductions and credits.
The provisions listed may have additional qualifications or restrictions. Other provisions of the tax code can further re-strict certain deductions or generate increased taxes. Ask your tax professional for more details.

Capital Gain Tax Rates  

Taxes paid. Itemized deduction for state and local taxes is limited to $40,000 ($20,000 MFS), decreased by 30% of the MAGI over $500,000 ($250,000 MFS) but not less than $10,000. Foreign real property taxes are not deductible.
Home mortgage interest. A taxpayer may treat no more than $750,000 ($375,000 MFS) as acquisition debt. The limit for debt incurred prior to December 15, 2017, is $1,000,000 ($500,000 MFS). Interest on home equity debt (except for acquisition or improvement) is not deductible.
Personal exemptions. A temporary deduction for seniors of $6,000 per qualified individual, reduced by 6% of the tax-payer’s MAGI exceeding $75,000 ($150,000 MFJ). All other personal exemptions are permanently terminated.

Individual Retirement Arrangements (IRAs)

2025 2024
Under age 50 …………………………. $ 7,000…….. $ 7,000
Age 50 or older ………………………. $ 8,000……. $ 8,000

Traditional IRA Phaseout Based on Modified AGI (MAGI)
If an individual is an active participant in an employer-sponsored retirement plan, the deduction for a traditional IRA contribution is phased out when MAGI is between the following.

Tax Year MFJ Single, HOH MFS
2025 ……. $ 126,000 to $ 146,000……. $ 79,000 to $ 89,000……. $ 0 to $10,000
2024 ……. $123,000 to $143,000 ……. $77,000 to $87,000……….. $0 to $x10,000

If you are not an active participant, but your spouse is, your deduction is phased out when MAGI is between the following.

Tax Year MFJ MFS
2025………………….. $236,000 to $246,000…………………. $0 to $10,000
2024 ………………. $230,000 to $240,000…………………. $0 to $10,000

ROTH IRA PHASEOUTS

2025 2024
MFJ or QSS………………….. $ 236,000 to $ 246,000……………. $ 230,000 to $ 240,000
Single, HOH,
or MFS* …………………… $ 150,000 to $ 165,000 $ 146,000 to $ 161,000
MFS……………………………………. $ 0 to $ 10,000……………… $0 to $ 10,000

• MFS and did not live with spouse during the year.

CHILD TAX CREDIT (CTC)

A $2,200 credit (under age 17), of which up to $1,700 is re-fundable, reduced by $50 for each $1,000 of MAGI over $200,000 ($400,000 MFJ).

CREDIT FOR OTHER DEPENDENTS

A nonrefundable credit up to $500 for dependents other than a qualifying child for the CTC.

ADOPTION EXPENSES

2025 maximum credit or exclusion…… $ 17,280
2025 maximum refundable portion…… $ 5,000
AGI phaseout…… $ 259,190 – $ 299,190
Unused credit carryforward…… 5 years

Medicare Tax on Earned Income
The employee portion of the hospital insurance (Medicare) tax is increased by an additional tax of 0.9% on wages received in excess of the threshold amount. However, un-like the general 1.45% hospital insurance (Medicare) tax on wages, this additional tax is on the combined wages of the employee and the employee’s spouse, in the case of a joint return.
Medicare Tax on Unearned Income
The Net Investment Income tax is 3.8% on the lesser of net investment income or the excess of modified adjusted gross income over the threshold amount.

Threshold Amount:

Joint return or surviving spouse…… $250,000
Married individual filing separately…… $125,000
All other tax filers…… $200,000

Threshold amounts for qualified business income limitations are:
• $394,600 Married Filing Jointly.
• $197,300 Single, Head of Household, Qualifying Surviving Spouse.
• $197,300 Married Filing Separately.

EXCESS BUSINESS LOSS LIMITATION:

For 2025, the threshold amount for determining an excess business loss is $313,000 ($626,000 MFJ).

GIFT EXCLUSION:

The annual gift exclusion for gifts to any person is $19,000.

ESTATE TAX EXCLUSION:

The basic estate tax exclusion amount is $13,990,000.