News & Updates

from June 2013

Jun 4, 2013 — by: Dorian Aiello

Dorian_1aNow that tax season is behind us, it is a good time to review the changes that will become effective for 2013.   Here is a recap of the most substantive changes effecting tax year 2013: 

  1. Payroll tax reductions expired on December 31, 2012. Congress did not renew the 2% reduction of the employee share of the Social Security Tax. This will make the paychecks a little less than the past two years. Self-employed individuals will pay in a little more as well due to the tax break lapse.
  2. Medicare surtax on high-income earners. A .9% tax increase will apply to earned income on amounts for married couples that exceed $250K/year and for singles and heads of household earning more than $200K/year. This additional tax only applies to the employee's share of the Medicare tax and Employers will need to withhold the surtax when year to date wages exceed $200K.
  3. A new 3.8% Medicare surtax on net investment income kick in this year as well. This provision was part of the 2010 Health care reform package with implementation to begin in 2013. This surtax affects married couples and singles with adjusted gross incomes that exceed $250K and $200K respectively. It is assessed on the smaller of the taxpayer's net investment income or the amount that exceeds the AGI threshold. Investment income includes interest, dividends, capital gains, rents and royalties. Excluded from the basket are retirement proceeds and tax free interest.
  4. Capital gains and Dividend rates rise to 20% for high income taxpayers. The Bush tax cuts will now be a little less for single filers with taxable income over $400K and married filers with taxable income over $450K. This would make the capital gain rate a maximum of 23.8% (including the Medicare surtax) for high income filers. The 15%/0% rates would still be in effect for taxpayers in with taxable income below these thresholds.
  5. The threshold limit for deducting medical expenses jumps to 10% of AGI for all taxpayers under 65. If any spouse is 65 or older the form 7.5% cap is still in effect.
  6. Retirement contribution limits have increased. The maximum contribution to a 401(k) has increased to $17,500, SIMPLE plans, $12,000, IRAs & Roth IRAs, $5,500, all a $500 increase over 2012.
  7. Standard mileage allowance for 2013 is 56.5 cents/mile for business driving and 24 cents/mile for medical related travel
  8. The 50% bonus depreciation for new equipment purchased in 2013 stays in place as well as the ability to expense up to $500K of business assets acquired in 2013 (IRC 179)
  9. The estate and gift tax exemption for 2013 increases to $5,250,000 for 2013. The annual gift tax exclusion rises to $14,000 per donee.
  10. The basic Medicare Part B premium increases to $104.90 per month in 2013. Remember that premiums are higher for upper-income seniors that exceed $170K AGI for couples and $85K limits for singles. 

We expect more changes to come. It should be a busy year as Congress debate health care reform and overhauling the tax code……….As usual, stay tuned……….

 

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