Some of the more pertinent and relevant tax changes occurring in 2013 include:
Medicare Surtaxes
A 0.9% Medicare surtax on earned income for higher income earners.
The levy applies to wages and self-employment income and
affects single taxpayers with incomes over $200,000 (Married over $250,000).
A 3.8% Medicare surtax on net investment income.
For the same income thresholds above, a 3.8% surtax is
imposed on earnings from investment income including interest, dividends,
capital gains, annuities, royalties and passive rental income. The surtax is levied on the smaller of the
filer’s net investment income or the amount over the income threshold.
Estate and Gift Taxes
The estate and gift tax exemption increases to $5,250,000.
The annual gift tax exclusion increases to $14,000 per donee.
New Tax Brackets
There is a new 39.6% tax bracket for those individuals
making more than $400,000 ($450,000 for married taxpayers filing jointly).
Standard Deduction
The 2013 standard deduction increases to $12,200 for joint
filers ($13,400 if one spouse older than 65 and $14,600 if both older than 65) and
$6,100 for single taxpayers ($7,600 if over 65).
Phase out of Itemized Deductions
Single income earners of $250,000 ($300,000 if filing joint)
will reduce their itemized deductions by 3% of any excess over the income
thresholds with the reduction not to exceed 80% of the deductions.
Personal Exemptions
Personal exemptions rise to $3,900 for filers and their
dependents but are phased out for high income earners (same thresholds as the
itemized deduction phase out). The
exemptions are reduced by 2% for every $2,500 over the thresholds.
Capital Gains and Dividends
For high income taxpayers (Single over $400,000 and Joint
over $450,000) the tax rates rise to 20%.
For other taxpayers, the rate will continue to be 15% with lower rates
possible for taxpayers in the 10-15% tax brackets.
AMT Exemption
The Alternative Minimum Tax exemption increases to $80,750
for couples and $51,900 for single taxpayers.
The exemption level is now tied to inflation and will automatically
increase in future years.
Social Security
The Social Security wage base rises to $113,700 for 2013.
Social Security benefits will increase by 1.7%.
Medicare
The basic Medicare Part B premium increases to $104.90 per
month. For higher income taxpayers ($170,000
for couples and $85,000 for singles), the premiums can be as high as $297.40
per month.
Medical Expenses
The threshold for deducting medical expenses jumps from 7.5%
of adjusted gross income to 10%.
However, if over 65, the old 7.5% rate continues to apply.
Deductible contributions to Health Savings Accounts rise to
$6,450 for family coverage and $3,250 for single coverage.
Health flexible spending accounts are now capped at $2,500.
Savings Accounts
The maximum 401(k) contribution is $17,500 for 2013.
The maximum IRA and Roth IRA contribution limits jump to
$5,500 with an extra $1,000 allowed for taxpayers born before 1964.
Businesses and Self-Employed
The standard mileage allowance for business driving is 56.5
cents per mile.
Renewed Tax Breaks
The election to write off state and local sales taxes was
revived.
Taxpayers aged 70 ½ and older can continue to directly
transfer up to $100,00 tax free from their IRAs to a qualified charity.
More changes are sure to occur throughout the year and we
will do our best to point out the most relevant changes on these pages.
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