2013 General Tax Review
2013 General Tax Review
Beau Diepold, CPA, of Diepold & Associates, LLC provides a brief overview of the "American Taxpayer Relief Act (ATRA) of 2012," the "Affordable Care Act (ACA)," and a general tax review for 2013.
Selected Items First Effective in 2013:
Selective Provisions of the “American Taxpayer Relief Act (ATRA) of 2012”
- Top Individual Tax Rate, Effective For Tax Years Beginning After 2012: The top statutory income tax rate increased from 35% to 39.6 on taxable income exceeding:
$450,000 for joint filers
$400,000 for single filers
$425,000 for head of household, and
$225,000 for married individuals filing separately
- Long-Term Capital Gain & Qualified Dividend Income Tax Rates, Effective Tax Years Beginning After 2012:
Joint Returns Single 0% Up To $72,500 $36,250 15% From/To $72,501 to $450,000 $36,251 to $400,000 20% More Than $450,000 $400,000
- Itemized Deduction Phase-Outs, Effective Tax Years Beginning After 2012 – Beginning in 2013, itemized deductions (other than medical expenses, investment interest, gambling losses, casualty losses, and theft losses) will be generally reduced by 3% of adjusted gross income in excess of the following thresholds:
$300,000 for joint filers
$250,000 for single filers
$275,000 for head of household, and
$150,000 for married individuals filing separately
- Personal Exemption Phase-outs, Effective Tax Years Beginning After 2012 – Each personal exemption will be reduced by 2% for each $2,500 (or part of $2,500) of AGI in excess of the thresholds:
From $300,000 to $422,500 for joint filers
From $250,000 to $372,500 for single filers
From $275,000 to $397,500 for head of household, and
From $150,000 to $211,250 for married individuals filing separately
- Maximum Estate, Gift and Generation Skipping Tax Rate - For estates of decedents dying after 2012 and for gifts and generation-skipping transfers after 2012, the maximum estate and gift tax rate, and the generation skipping tax rate are increased from 35% to 40%
- 9% “Additional Medicare Tax” on W-2 Income of Higher-Income Individuals – Generally, for W-2 wages received after 2012, the ACA imposes a .9% Additional Medicare Tax on the amount by which an individual’s W-2 wages exceed: a.) $250,000 if married filing a joint return, b.) $125,000 if married filing separately, and c.) $200,000 for other individuals. Form 8959.
- Employer Only Required to Withhold on Wages in Excess of $200,000 – For wages paid after 2012, an employer is required to withhold the .9% Additional Medicare Tax on the amount of wages an employee receives in excess of $200,000 (regardless of the employee’s filing status).
- “3.8% Net Investment Income Tax (NIT)” Imposed on Individuals – Effective for tax years beginning after 2012, Section 1411 imposes a 3.8% NIT on the lesser of:
- an individual’s "net investment income" or
- the individuals modified adjusted gross income in excess of:
- $250,000 if married filing joint
- $125,000 if married filing separately, and
- $200,000 for other individuals. Form 8960.
- an individual’s "net investment income" or
- Deduction Threshold for Medical Expenses Raised From 7.5% to 10% of AGI – Beginning in 2013, the deduction threshold for medical expenses on Schedule A is increased from 7.5% of AGI to 10% of AGI unless the taxpayer or the taxpayer’s spouse is age 65 or older by the end of the year.
- Annual Contributions to Health FSAs Capped at $2,500 – Starting in 2013, the Health Care Act requires that cafeteria plans cap the annual salary reduction contribution to a health FSA at $2,500. The $2,500 cap will be adjusted for inflation after 2013.
Selective Provisions of the “Affordable Care Act (ACA)”
- Shared Responsibility Penalty (“Excise Tax”) for Individuals Failing to Carry Health Insurance (Individual Mandate) – ACA generally requires individuals to pay an excise tax for each month beginning after 2013 for which they do not have “qualified health plan” coverage for themselves and their dependents, unless they qualify for an exemption from the tax.
- $95 per uninsured adult and $47.50 per uninsured person under age 18 with maximum penalty of $285, or
- 1% of taxpayer’s “household income” in excess of Form 1040 filing threshold (For 2014 - $20,000 for joint filers under age 65 and $10,000 for single filers under age 65)
- $325 per uninsured adult and $162.50 per uninsured person under age 18 with maximum penalty of $975, or
- 2% of taxpayer’s “household income” in excess of Form 1040 filing threshold
- $695 per uninsured adult and $347.50 per uninsured person under age 18 with maximum penalty of $2,085, or
- 2.5% of taxpayer’s “household income” in excess of Form 1040 filing threshold
- Refundable “Premium Assistance Credit” (PAC) for Low and Middle Income Taxpayers – ACA provides for a refundable tax credit (the “premium assistance credit” or “PAC”) for eligible individuals who purchase health insurance through a qualified health insurance exchange.
Married individuals must file a joint income tax return to be eligible for the credit.
Taxpayers Must File Return and Reconcile Premium Assistance Credit – Every taxpayer who receives advance payments of the PAC generally must file an income tax return for the year for which advance payments were received by April 15th of the following year. A taxpayer will be required to reconcile a.) the amount of the PAC allowed, with b.) the “PAC advance payments” made directly to the insurance company. The reconciliation will be reflected on the taxpayer’s income tax return for the taxable year of the PAC (presumably the IRS will develop a new form for this reconciliation). If a taxpayer’s “actual PAC” for the taxable year exceeds the taxpayer’s “PAC advance payments,” the taxpayer may receive the excess as a refundable credit. On the other hand, if a taxpayer’s “PAC advance payments” for the taxable year exceed the taxpayer’s “actual PAC,” the taxpayer will owe the excess as an “additional income tax liability.”
2013 Tax Rate Tables:
Married Individuals Filing Joint Returns
If Taxable Income Is: The Tax Is:
Not over $17,85010% of the taxable income Over $17,850 but not over $72,500 $1,785 plus 15% of the excess over $17,850 Over $72,500 but not over $146,400 $9,982.50 plus 25% of the excess over $72,500 Over $146,400 but not over $223,050 $28,457.50 plus 28% of the excess over $146,400 Over $223,050 but not over $398,350 $49,919.50 plus 33% of the excess over $223,050 Over $398,350 but not over $450,000 $107,768.50 plus 35% of the excess over $398,350 Over $450,000 $125,846 plus 39.6% of the excess over $450,000 |
If Taxable Income Is: The Tax Is:
Not over $8,925 10% of the taxable income Over $8,925 but not over $36,250 $892.50 plus 15% of the excess over $8,925 Over $36,250 but not over $87,850 $4,991.25 plus 25% of the excess over $36,250 Over $87,850 but not over $183,250 $17,891.25 plus 28% of the excess over $87,850 Over $183,250 but not over $398,350 $44,603.25 plus 33% of the excess over $183,250 Over $398,350 but not over $400,000 $115,586.25 plus 35% of the excess over $398,350 Over $400,000 $116,163.75 plus 39.6% of the excess over $400,000 |
2013 Standard Deduction Amount:
Married Individuals Filing Joint Returns - $12,200
Unmarried Individuals - $6,100
2013 Itemized Deduction Beginning AGI Phase-Out Threshold:
Married Individuals Filing Joint Returns - $300,000
Unmarried Individuals - $250,000 2013 Personal Exemption Amount - $3,900 2013 Personal
Exemption Beginning AGI Phase-Out Threshold:
Married Individuals Filing Joint Returns - $300,000
Unmarried Individuals - $250,000
2013 Maximum IRA Contribution:
Maximum contribution limit for traditional & Roth IRAs - $5,500
Age 50 or older by end of year - $6,500
2013 Phase-Out Range for Roth IRAs:
Married Individuals Filing Joint Returns - $178,000 to $188,000
Unmarried Individuals - $112,000 to $127,000
2013 Maximum 401(k) Elective Deferral: 2013 Maximum SIMPLE Deferral Amount:
Under Age 50 - $17,500 Under Age 50 - $12,000
Age 50 or Older - $23,000 Age 50 or Older - $14,500
2013 Estate and Gift Tax Amounts:
Maximum Estate & Gift Tax Rate – 40%
Annual Exclusions for Gifts - $14,000
Value of Unified Credit if Used Against Estate Tax - $5,250,000
FICA Wage Base - $113,700 for 2013 and $117,000 for 2014
Section 179 Limitations - $500,000 for tax years beginning in 2013 and $25,000 for tax years beginning in 2014
2013 Optional Auto Mileage Deduction – 56.5 cents
Should you have any questions about the information contained above, please contact Beau Diepold, CPA at (410) 598-6379.
About the Author
Beau Diepold is a certified public accountant since 1998. He has been employed in the field of public accounting 1996. He lives in Abingdon with his wife, Natalie and their two sons.
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