Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) — Here are some tax facts and figures for 2013 that you will need to know when doing year-end tax planning:
SAME SEX MARRIAGES
The Supreme Court overturned the Defense of Marriage Act (DOMA). The Court decided that the federal government has no right to deny benefits to same-sex individuals who have married and reside in a state that has legalized same-sex marriage.
As a result of the decision, same-sex couples, who are legally married and reside in states that permit same-sex marriage, will be able to prepare their federal and state tax returns as a married couple, using married person tax law, same as any other married couple.
THE STANDARD DEDUCTION
- Single/Married Filing Separate = $6,100
- Married/Qualifying Widow(er) = $12,200
- Head of Household = $8,950
The Standard Deduction for a dependent is the greater of (1) $1,000, or (2) the sum of $350 and the individual's earned income (up to $6,100).
The additional Standard Deduction amount for the age 65 or older or blind is $1,200 for married individuals and $1,500 for Single and Head of Household.
The personal exemption is $3,900.
THE PEP REDUCTION OF PERSONAL EXEMPTIONS
Personal exemptions are reduced by 2% for each $2,500 ($1,250 if Married Filing Separate), or portion thereof, that a taxpayer's AGI exceeds $250,000 for Single filers, $275,000 for Head of Household, $300,000 for Married Filing Joint and $150,000 for Married Filing Separate.
ALLOWABLE MEDICAL DEDUCTIONS
For taxpayers under age 65, medical expenses are deductible on Schedule A only to the extent that the total allowable expenses exceed 10% of Adjusted Gross Income. The exclusion remains at 7.5% of AGI for taxpayers under age 65.
LONG-TERM CARE INSURANCE PREMIUM AGE-BASED DEDUCTION LIMITS
- Age 40 or less = $360
- Age 41-50 = $680
- Age 51-60 = $1,360
- Age 61-70 = $3,640
- Age 71 + older = $4,550
THE STANDARD MILEAGE ALLOWANCE
- Business Mileage = 56.5 cents per mile
- Medical and Moving Mileage = 24 cents per mile
- Charitable Mileage = 14 cents per mile
THE PEASE REDUCTION OF ITEMIZED DEDUCTIONS
Itemized deductions are reduced by 3% of the amount a taxpayer's AGI exceeds $250,000 for Single filers, $275,000 for Head of Household, $300,000 for Married Filing Joint and $150,000 for Married Filing Separate. The reduction cannot exceed 80% of total itemized deductions (not including any deductions for medical expenses, investment interest, and casualty, theft or gambling losses).
CONTRIBUTION LIMITS FOR TAX-DEFERRED PENSION PLANS
- IRA = $5,500
- IRA Catch-Up Contributions at age 50 and older = $1,000
- SIMPLE Plan = $12,000
- SIMPLE Catch-Up Contributions at age 50 and older = $2,500
- 401(k), 403(b), Profit Sharing Plans = $17,500
- 401(k), 403(b), Profit Sharing Plans Catch-Up Contributions at age 50 and older = $5,500
TAX RATE SCHEDULES
Tax Rate Single
- 10% Up to $8,925
- 15% $8,926–$36,250
- 25% $36,251–$87,850
- 28% $87,851–$183,250
- 33% $183,251–$398,350
- 35% $398,351–$400,000
- 39.6% Over $400,000
Tax Rate Married Filing Joint Qualifying Widow(er)
- 10% Up to $17,850
- 15% $17,851–$72,500
- 25% $72,501–$146,400
- 28% $146,401–$223,050
- 33% $223,051–$398,350
- 35% $398,351–$450,000
- 39.6% Over $450,000
Tax Rate Married Filing Separate
- 10% Up to $8,925
- 15% $8,926–$36,250
- 25% $36,251–$73,200
- 28% $73,201–$111,525
- 33% $111,526–$199,175
- 35% $199,176–$225,000
- 39.6% Over $225,000
Tax Rate Head of Household
- 10% Up to $12,750
- 15% $12,751–$48,600
- 25% $48,601–$125,450
- 28% $125,451–$203,150
- 33% $203,151–$398,350
- 35% $398,351–$425,000
- 39.6% Over $425,000
CAPITAL GAINS TAX RATES
The special tax rates for long term capital gains and qualified dividends are –
- 0% = 10% and 15% tax brackets,
- 15% = 25%, 28%, 33%, or 35% tax brackets,
- 20% = 39.6% tax bracket.
NET INVESTMENT INCOME SURTAX
Taxpayers with an AGI over $200,000 for Single and Head of Household filers, $250,000 for joint filers and $125,000 for married couples filing separately will pay an 3.8% surtax on net investment income, which includes interest, dividends, capital gains, annuities, royalties, rents and pass-through income from passive S-corporations and partnerships less related investment expense deductions from Schedule A.
THE ALTERNATIVE MINIMUM TAX
The AMT exemption amount is –
- $51,900 - Single and Head of Household
- $80,800 - Married Filing Joint and Qualifying Widow(er)
- $40,400 - Married Filing Separate
For the first the AMT exemption phase-out thresholds have been indexed for inflation. The AMT exemption is reduced as Alternative Minimum Taxable Income exceeds –
- $115,400 – Single and Head of Household
- $153,900 – Married Filing Joint and Qualifying Widow(er)
- $ 76,950 – Married Filing Separately
The 28% AMT tax rate kicks in at AMT net taxable income (after the exemption allowed) of $179,500 ($89,750 for Married Filing Separate).
SOCIAL SECURITY WAGE BASE
The maximum amount of wages subject to the 6.2% Social Security tax is $113,700. The maximum Social Security tax withholding is $7,049.40.
This maximum wage base also applies to the Self Employment Tax.
One final year-end tip before I go –
If you changed your name during the year due to marriage or divorce, make sure to report the change to the Social Security Administration. The IRS is very picky about matching names to Social Security numbers. If a number on your return does not match exactly the name in the files of Social Security, the IRS will delay or reduce your refund. Be sure to notify Social Security of the change by requesting a new Social Security card ASAP at www.ssa.gov.
--Written by Robert D. Flach for MainStreet