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7 Tax Changes That Could Impact Your 2013 Return

Tax PlanningNo Comments

tax wallet empty 150x150 7 Tax Changes That Could Impact Your 2013 ReturnA recent Wall Street Journal article noted 7 tax changes that could impact your 2013 return, including:

Increase in top tax rate on income, capital gains and dividends.  A new top tax rate of 39.6% now applies to individuals earning more than $400,000/year, married couples filing jointly with income in excess of $450,000/yr. and head of household filers with annual income of over $425,000.  For people in these income brackets, the top tax rate on capital gains and dividends has increased to 20%.

Investment income Medicare surtax.  If your adjusted gross income (AGI) is more than $200,000 (individual) or over $250,000 (married, filing jointly), you could be subject to the 3.8% Medicare surtax.  If — or how much — you owe depends on the amount of your net investment income and how much your AGI exceeds the threshold of $200K/$250K.

Medicare surtax on combined salaried and self-employed income.  Taxpayers with a combined salary and self-employment income greater than $200,000 (individual) or $250,000 (married, filing jointly) will be subject to an additional 0.9% Medicare surtax – on top of the 2.9% Medicare tax.

Personal and dependent exemptions cut.  Personal and dependent exemptions may be cut or eliminated entirely for some taxpayers for 2013.  The phasing out of these exemptions begin at $250,000 AGI for individuals, $300,000 AGI for married couples filing jointly, and $275,000 AGI for heads of household.

Itemized deductions cut.  The phasing out of itemized deductions – home mortgage interest, property taxes, state and local income taxes, charitable donations and others — begin at $250,000 AGI for individuals, $300,000 AGI for married couples filing jointly, and $275,000 AGI for heads of household. The affected deductions are reduced by an amount equal to 3% of AGI over the threshold limits.

Medical deduction threshold increased.  The new threshold for claiming itemized medical expense deductions is up 2.5% for 2013 — medical expense must now exceed 10% of AGI, up from 7.5% in 2012.  However, if you or your spouse was over the age of 65 at the end of 2013, this higher level won’t kick in until 2017.

Married same sex couples have to file as married taxpayers.  Same sex couples that were legally married in states that recognize same sex marriage must file their federal taxes either jointly or as married-filing-separately.

If you are looking for ways to save on taxes, contact our Costa Mesa law firm.