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Congress has passed a few late tax laws and we want to ensure that you have the most up to date, accurate tax information. The fiscal cliff deal Congress agreed on contains tax provisions that will affect taxpayers in 2013 and beyond. Here are some highlights:
Payroll taxes:
For 2013, wage earners will
again pay a 6.2% payroll tax on the first $113,700 in wages since the
deal did not extend the 4.2% rate that had been in place for two years.
This means workers earning the national average salary of $41,000 will
receive $32 less on every biweekly paycheck.
Tax rates:
Taxes are going up on individual
filers with incomes above $400,000 and couples above $450,000. They
will pay 39.6% on income above this threshold, up from the 35% rate in
place since 2001. All other current income tax rates ranging from 10% to
33% are now permanent.
Investment taxes: Rates on capital gains are
affected by both the new law and the Affordable Care Act. Based on taxable income they will be as follows:
SINGLE
Taxable income Tax rate on capital gains Taxable income
0 to $35,350
$35,351 to $200,000
$200,001 to $400,000
Over $400,001
Family tax breaks: Tax breaks important to
families have been extended for five years. They include:
- American Opportunity Education Tax Credit- a partially refundable education credit of up to $2,500 a year for the first four years of college
- Child Tax Credit of up to a $1,000 credit for each child under age 17
- Earned Income Tax Credit which provides a credit for working Americans with low to moderate incomes
- Expanded dependent care credit allows certain taxpayers to deduct up to 35% of expenses to a maximum of $6,000 for two children (permanently extended)
Itemized deductions/personal exemption:
Single
filers making over $250,000 and married couples making over $300,000
will be limited in personal exemptions and itemized deductions. Those
filers with incomes above $422,500 will not qualify for a personal
exemption and will be further limited on itemized
deductions.
Alternative Minimum Tax
(AMT): Many filers
in the "middle class" will be protected from AMT since the income
exemption levels will be permanently adjusted for inflation. We expect
to receive more details here.
Estate taxes:
The exemption for estate taxes
remains at $5.12 million and will be indexed to inflation going
forward. However, the top rate rises to 40%, from 35% for those in the
highest income bracket.
Marriage penalty:
Married couples will continue
to receive a standard deduction that's twice that of individuals. The
income ranges for the 10% and 15% tax brackets for marrieds are also
double those for singles.
Debt forgiveness:
Homeowners who receive principal
forgiveness or go through a short sale or foreclosure will not have to
pay tax on the amount of debt forgiven since the deal extends this 2007
act by one year.
Tax breaks: The deal extends several tax deductions
including:
- State and local sales taxes.
- Teachers can continue to get a $250 break on school supply expenses.
- Eligible students can continue to deduct tuition and other education-related expenses.
-
Individual
Retirement Account holders who are older than age 70.5 can continue to
request tax-free distributions for charitable purposes.This Article Thanks to : Patrick J. O'Malley
