Tax Changes for 2013 – Tax Changes for Individuals

Tax Changes for 2013 – Tax Changes for Individuals

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Mike SullivanThere are a number of tax changes this year that are in affect for individuals. Listed below are some of those changes.

To find out more on how they may impact you simply call the office is a Fresh Start Tax and speak directly to Tax Attorneys,  CPAs, Enrolled Agents and former IRS Agents.

We will also be able to audit proof your tax return.

We have been preparing tax returns since 1982 and we can assure that you will pay the lowest tax rate possible

Tax Changes for 2013

Income Taxes

The top income tax rate increases to 39.6 percent for taxable income in excess of $400,000 for individuals and $450,000 for married couples filing jointly.

All other existing income tax rates are made permanent.

An additional 3.8 percent unearned Medicare surtax applies to the lesser of net investment income or the excess of modified adjusted gross income (AGI) over $200,000 for individuals and $250,000 for married couples filing jointly.

This  particular surtax was enacted as part of the Affordable Care Act.
The Medicare Tax Rate.

The Medicare Tax Rate of 0.9 percent applies to compensation or self-employment income in excess of $200,000 for individuals and $250,000 for married couples filing jointly.

Both qualified dividends and capital gains.

Both qualified dividends and capital gains are taxed at 20 percent for those with taxable income in excess of $400,000 for individuals and $450,000 for married couples filing jointly.

The 2012 rates for dividends and capital gains remain unchanged for individuals with taxable income less than $400,000.

Both qualified dividends and capital gains

Both qualified dividends and capital gains will be phased out for those with AGI in excess of $250,000 for individuals and $300,000 for married couples filing jointly.

Personal exemptions

Personal exemptions will be completely phased out when income exceeds the threshold amount by $125,000. The maximum reduction in itemized deductions under this limitation is 80 percent.

The itemized limitation does not apply to investment interest, medical expenses or casualty losses although medical expenses must now exceed 10 percent of AGI to be deductible.

The Alternative Minimum Tax
The Alternative Minimum Tax  is permanently “patched,” meaning that exemptions from AMT are increased to $50,600 for individuals and $78,750 for married couples filing jointly.

Nonrefundable credits are now allowed as credits against AMT. These provisions are retroactive to 2012

Employee portion of Social Security
The reduced rate of 4.2 percent for the employee portion of Social Security was allowed to expire. Beginning in 2013, the tax rate will revert to 6.2 percent.

Charitable Distributions
For 2012 and 2013 only, charitable distributions from individual retirement accounts (IRAs) are reinstated.

Individuals over age 70½ can make direct distributions (up to $100,000) to charity from an IRA and exclude these distributions from their income (although no charitable deduction is allowed).

A transition rule allows direct charitable distributions in January 2013 to count as 2012 charitable contributions.

Distributions made to individuals in December 2012 can be considered to be donated to charity in 2012 if the gross amount of the distribution is contributed to charity before February 1, 2013.

Maximum income tax rate for trusts
The maximum income tax rate for trusts with income over $11,950 increases to 39.6 percent. The 3.8 percent unearned Medicare surtax will also apply to trust income.

Deductions and credits

Several deductions and credits were extended only through 2013. One such extension allows taxpayers to claim state sales taxes paid as an itemized deduction in lieu of state income taxes paid. This is particularly attractive for taxpayers residing in states with no income tax.

Some thoughts

For both political parties guaranteeing they were not going to raise tax rates during the elections you could’ve fooled me. These tax rates are really a sucker punch to the American public that just shows you that neither the President or Congress can be trusted on anything they said. This is a sad commentary of our political system.


About Michael Sullivan

Michael Sullivan is Former Award Winning IRS Agent and Teaching Instructor with the Internal Revenue Service. Mr. Sullivan worked in the local, district and regional offices of the IRS. Mr. Sullivan has been in private practice since 1982 and is a tax expert in the field of Federal and State Tax Resolution. Connect with Michael Sullivan on Google+

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