This tax update summarizes important tax changes that took effect in 2013. Please contact our office if you have any questions regarding these changes.
Additional Medicare Tax – Starting in 2013, an additional 0.9% Medicare Tax will be assessed on wages and self-employment income greater than certain income levels. Wages and self-employment income greater than $125,000 if married filing separately (MFS), $250,000 if married filing jointly (MFJ) and $200,000 for any other filing statuses will attract this additional Medicare Tax.
Net Investment Income Tax – In 2013, you may be subject to this tax which is 3.8% of the lower of either your net investment income or your adjusted gross income that is greater than $125,000 if filing MFS, $250,000 if filing MFJ or $200,000 for any other filing status.
Tax Rate Changes – The tax rates for 2013 range from 10% to the highest rate of 39.6%. Your individual tax rate will vary depending on your filing status and the amount of your taxable income.
Net Capital Gain and Qualified Dividends – The maximum tax rate of 15% on net capital gains and qualified dividends has increased to 20% for certain taxpayers.
Medical and Dental Expenses – The threshold for deducting medical and dental expenses has increased from 7.5% to 10% for taxpayers that are under the age of 65. This means that for 2013, you can only deduct expenses paid that are in excess of 10% of your adjusted gross income.
Personal Exemption Amount – The personal exemption amount has increased to $3,900 for 2013. The exemption amount is reduced however, if your adjusted gross income is more than $150,000 if filing MFS, $250,000 if filing single, $275,000 if filing Head of Household and $300,000 filing any other filing status.
Itemized Deductions Limitation – There are new limits on the amounts of certain itemized deductions that are allowed as a deduction in 2013. Your itemized deductions will be reduced if your adjusted gross income is greater than $150,000 if filing MFS, $250,000 if filing single, $275,000 if filing Head of Household and $300,000 filing any other filing status. Deductions affected by this limitation include taxes paid, interest paid, gifts to charity and other miscellaneous deductions.
Expiring Credits – There are certain credits that have expired and will not be allowed on a 2013 tax return. These credits include the “Plug-in Electric Vehicle Credit” and the “Prior Year Minimum Tax Credit”
2013 Standard Mileage Rate Increases – The 2013 standard mileage rates for business use of your car has increased to 56 ½ cents per mile. The 2013 standard mileage rate for use of your car to get medical care has increased to 24 cents per mile. The 2013 standard mileage rate for use of your car to move has increased to 24 cents per mile.