2013 Tax Changes

As 2013 wanes, I’m reminded that this year there are a number of tax changes slated to take effect that must be considered. As you might have expected, most of the changes affect higher income taxpayers but in my opinion, monetary impact aside, the worst part is that it adds more complexity to an already complicated tax code. In fact, the 2013 tax code is 73,954 standard size pages of especially dry and sometimes grueling requirements. Shouldn’t something be done to simplify this monstrosity that has been created over the years? I’m not suggesting that a flat tax is the answer but just think about the time and money that could be saved by taxpayers and the federal government alike if the code could be simplified. Do we really need almost 74,000 pages?

Regardless of my opinion, in this article I’ll hit on some of the most prevalent changes to the tax code, but for a complete breakdown of all the changes or ideas on how you should prepare I recommend you schedule an appointment with your financial advisor and CPA to get a complete picture of where you stand.

  1. Taxpayers with income greater than $400,000 ($450,000 for couples) will now face a 39.6% tax rate, up from the old 35% rate.

  2. Long-term capital gains tax for those earning over $400,000 ($450,000 for couples) will now be taxed at 20% instead of 15%.

  3. The top tax rate on estates and gifts will be raised to 40% (up from 35%)

  4. All earned income above $200,000 ($250,000 for couples) will now be subject to an additional .9% Medicare payroll tax.

  5. There’s a new 3.8% surtax on the lesser of net investment income or modified gross income above $200,000 ($250,000 for couples) as part of the Affordable Care Act.

  6. Itemized deductions for taxpayers with adjusted gross income over $250,000 ($300,000 for couples) will be reduced by 3% of the amount of income over the threshold.

  7. The alternative minimum tax exemption has increased to $51,900 ($80,800 for couples).

  8. Those who don’t itemize their deductions will be able to take the standard deduction. The basic standard deduction is set to increase to 6,100 (12,200 for couples) in 2013.

While this is not a complete list, it should give everyone a broad overview of what your 2013 tax burden will look like. To those of you with concerns about what you’ll be paying, or if you’ve recently shifted tax brackets, I strongly recommend that you get in touch with your advisor and tax specialist so you can begin to prepare for the changes. The last thing anyone wants is a surprise come tax season.  

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