7 Sneaky Taxes That Could Blindside You This Season

sneaky taxes
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By Alden Wicker

You've already done your taxes, right? (If not, start here, with our easy guide to filing, because time is running out.)

But even if you've got them figured out -- or have an excellent accountant doing them for you -- you still might be in for some expensive surprises this season.

Below, Joseph Boyce, a New York-based CPA, and Gail Rosen, CPA and owner of a New Jersey-based accounting firm, highlight the taxes they'll be warning clients about this season.

Granted, these picks don't apply to everyone -- which is exactly why they're so sneaky. From brand-new measures like the NIIT to longstanding gotchas like the AMT, you'll want to be aware of these long before you file.

1. The Medicare Tax. Let's start with the shiny new Medicare tax, which was instituted as part of the Affordable Care Act (aka Obamacare). It only affects people with incomes over a certain threshold ... but if you are one of those people, you might be surprised to see a few hundred dollars tacked on your tax bill.

Who May Be Subject:: If you make at least $200,000 individually, $250,000 filing jointly with your spouse or $125,000 filing separately from your spouse, you'll be assessed a 0.9 percent tax on any income beyond that.

What You Should Know: The thing is, according to Boyce, you can be taxed two ways: If you make over $200,000 individually, you may not notice, as your employer takes the tax out of your paycheck throughout the year.

Or, there's another option. "If Jim is married and made $190,000 in 2013, and his spouse Kim made $150,000, neither made enough to have the tax taken out of their paycheck all along," illustrates Boyce. "Instead, because they make $340,000 together, they will get hit with the whole tax at the end of the year. As a result, the couple will have to pay an additional tax on the $90,000 over $250,000, which would be $810." That, you'll notice.

2. The Jock Tax. This tax, levied by 22 individual states on high-earning traveling workers, is called the jock tax because its most high-profile targets are famous athletes like basketball and football players. Technically, it is the most common form of what's called "nexus," which taxes income earned out-of-state. So, for example, Seahawks and Broncos players who traveled to New Jersey to play the Super Bowl will owe the state taxes on a percentage of their income when they file their 2014 tax return -- because New Jersey is where they earned it.

Who May Be Subject: Athletes are targeted by this tax because both their salaries and schedules are made public, but states have also tried to target traveling musicians, lawyers and bankers by looking up their travel records. Even if you aren't a famous athlete or musician, if you travel for work, you should be on the lookout for this tax.

What You Should Know: "The minute you spend one hour in a state on business, you could have, depending in the state rule, nexus there," explains Rosen. "Every state has a different law." And even if you don't report your out-of-state income, you might not skirt this tax -- other people could be reporting for you. "If you work for someone, they could write on your W-2 that you are in different states, that you go to different offices. If you're self-employed, you might get a 1099 that is filed in that state office," he says. "Or at a trade show, state officials may come up to you and say, 'Are you registered to do business in this state?' If you don't report, your accountant is going to have to do a lot more work." If you cross state borders in your work, inform your accountant of all earnings in other states -- or at the very least, where you've traveled for business and what you were doing there. And yes, if this tax applies to you ... you'll want an accountant.

3. Local Taxes. Depending on where you live, you may pay not only federal and state taxes but county and city taxes too.

Who May Be Subject: This tax could apply to anyone, but it will probably be most impactful on residents of larger cities. See specific examples below.

What You Should Know: New York City is the most famous for having sky-high taxes just for living in its borders. (As this couple lamented.) But high local taxes pop up across the Northeast and Midwest in densely populated areas such as Detroit; Wilmington, Del.; and Portland, Maine. "Every city is different in what they charge and how they do it," says Rosen, "but rates are around 3 percent to 4 percent."

4. The Alternative Minimum Tax. The Alternative Minimum Tax was first conceived as a way to keep the wealthy from taking advantage of tax loopholes. But the AMT was never indexed to inflation and essentially became a tax on the middle class. Note that in 2013, however, Congress did pass a permanent "patch" to make sure the tax reflects inflation, which should decrease the number of people paying it going forward.

Who May Be Subject: You may be subject to the AMT if your household makes more than $100,000 and has very large deductions. To learn more about this tax and whether it might apply to you, consult our guide to the AMT.

What You Should Know: It's hard to tell for sure if you're going to be hit, because there are a lot of factors that go into calculating whether the AMT applies to you. Basically, you're asked to calculate your taxes twice: in the normal way, and the alternative way, via Form 6251. Whichever calculation comes out to be higher is the one you pay. The other downside of the AMT is that you may lose eligibility for deductions such as medical expenses or miscellaneous business expenses.

But according to Rosen, there may be an upside: "Lately, because tax rates have increased for people making higher incomes, fewer people pay the AMT. If you're already paying it, you might think tax rates are rising, but in truth they didn't go up by much for you because you already pay more through the AMT. You might not even notice the change!"

5. The Mansion Tax. Officially known as the real estate transfer tax, this imposes a tax of 1 percent of the sale price of any residential property over $1 million.

Who May Be Subject: This one is for buyers in New York state only.

What You Should Know: Except in special cases, this tax is the responsibility of the buyer, to be paid within 15 days after the closing. This tax doesn't appear on your return, but it's a tax you'll want to watch out for nonetheless. "Before you go to closing, you have to know all the checks you're going to write out," advises Boyce. "Don't be surprised that you have to pay 1 percent to the state. Even if it's a $1 million purchase, 1 percent of that is another $10,000."

6. Net Investment Income Tax. Here's a word to add to your vocabulary: rentier. It's someone who brings in a lot of passive income like interest, rental income, royalties or capital gains and dividends on investments. And starting in 2013, rentiers are subject to a brand-new tax.

Who May Be Subject: "Basically," Boyce says, "if you make passive income and your income is over a certain threshold, then you're hit with an additional 3.8 percent of NIIT." That threshold is $200,000 if you're filing singly, and $250,000 if you're married filing jointly.

What You Should Know: Just to be clear, if you make $197,000 from your salary, and $5,000 from passive income, you'll get taxed at the NIIT rate on that $5,000 only.

7. Canceled Debt. If you default on your debt payments and your creditor decides to write them off without demanding compensation, that debt is considered canceled, or forgiven. Once you get over being giddy that your mortgage debt has been slashed, %VIRTUAL-article-sponsoredlinks%your credit card debt forgiven or your student loan debt canceled, you have a harsh truth to face: The IRS considers canceled debt as income, and expects you to pay taxes on it.

Who May Be Subject: This tax doesn't apply to everyone with debt -- only people with more than $600 of canceled debt. For example, if you had $10,000 in credit card debt, defaulted on payments, and you've negotiated your debt down to $3,000, you'll owe income tax on $7,000.

What You Should Know: "A lot of people whose loans were forgiven are surprised that they have to pay taxes on that debt," says Rosen. "Though there are some exceptions for 2013." For instance, the Mortgage Forgiveness Debt Relief Act, created in 2007 to help people hit by the housing crisis, allows you to exclude debt forgiven on your principal residence. In addition, bankruptcy, insolvency (when your debts are worth more than the fair market value of all your assets), certain farm debts and non-recourse loans are excepted.

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Retirement account contributions serve two purposes. Most contributions (except the Roth Individual Retirement Account) allow you to deduct from your taxable income the amount paid into the retirement account. This reduces your total taxable income. Further these funds grow tax free until retirement. If you start early, this strategy alone can secure your retirement.
Contribute to a health savings account if you have a high-deductible medical plan. The contributions unused for medical expenses can roll over indefinitely and grow tax-free (similar to the assets in a retirement account).
Reduce vacation costs by deducting the percent of the unreimbursed expenses spent on business from the total costs. This could include airfare and part of hotel bill (proportionate to time spent on business activities).
4. Don't be afraid to take the home office deduction, if you work for yourself or have a side business. This deduction allows you to deduct the percent of your home which is used for your business (on Schedule C, 1040). If the guest bedroom is used exclusively for a home office, and constitutes one-fifth of your apartment's living space, you can deduct one-fifth of rent and utility fees for your home office.
Self-employed individuals (either full-time or part-time) are eligible for scores of tax deductions. A few of those expenses include business related vehicle mileage, shipping, advertising, website fees, percent of home internet charges used for business, professional publications, dues, memberships, business-related travel, office supplies and any expenses incurred in order to run your business.
Self-employed individuals who pay 100 percent of their Social Security taxes owed (at a rate of 15.3 percent) can deduct 50 percent of the taxes paid. You don't even need to itemize to claim this tax deduction.
There is one more big-time deduction for those who are self-employed or have a side business. In 2013, you're eligible for "bonus depreciation" of 50 percent. This means that you can write off 50 percent of the cost of new equipment purchased instead of writing it off over many years.

Unreimbursed vehicle expenses are another frequently overlooked tax break. You can't deduct commuting costs, but if you travel to satellite offices or drive your own vehicle for business and aren't reimbursed, you can deduct mileage costs.

Tax credits are great, because they are deducted from the tax owed. American Opportunity Tax Credit is available for all for years of college. You receive a tax credit on 100 percent of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000 for a maximum of $2,500 per student. That's $2,500 deducted from the amount of tax owed (as long as you meet certain income regarding school courses that improve job skills).
The Lifetime Learning Credit is great for adults boosting their education and training. This credit is worth a maximum of $2,000 per year (up to 20 percent of up to $10,000 spent on post-high school education) and helps pay for college and educational expenses that improve your job skills.
The Earned Income Tax Credit lowers the overall tax bill for low and moderate-income working families.

The state sales tax break gives itemizers the chance to either deduct state income or state sales taxes paid. This benefit is great if you live in a state without income taxes.

Investors, when calculating the cost basis after selling a financial asset, should make sure to add in all of the reinvested dividends. That increases the cost basis and reduces your capital gain when you sell the investment.

Charitable deductions are often overlooked. Include payroll deductions (such as the United Way), checks, cash and donations of goods and clothing.

If you are an adult child who is not claimed as a dependent by your parents, here is a possible tax break for you. If your parents pay back your student loans, the IRS assumes the money was given to the child, who then repaid the debt. Thus the young adult child can deduct up to $2,500 of student loan interest paid by their parents.
I remember tallying job hunting costs to deduct from my meager tax bill in the past. If you're looking for a job in the same field, you can deduct all related expenses as miscellaneous expenses if you itemize (and they must pass a 2 percent threshold). You can deduct these expenses even if you didn't find a new job.
Are you in the military reserves, such as the National Guard? If you travel more than 100 miles from home and need to be away overnight, then you can deduct lodging and one half the cost of meals while you are away. Of course, you can also deduct mileage costs as well.
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