Tax Law Changes

Change in Tax Rates for 2013 -

  • The highest tax rate for 2013 was increased to 39.6%, however, the taxable income per tax bracket increased slightly to lessen the affect of the higher tax rate.
  • For example:
  • The 10% taxable income bracket increased for single taxpayers from $8,700 to $8,925 and the 15% taxable income increased from $35,350 to $36,250. This means the a single filing taxpayer with taxable income of $30,000 will pay 10% tax on the first $8,925 and 15% tax on the remaining income.

    For more information on additional tax brackets and filing statuses, please refer to the 2013 tax rate schedule in the 1040 instructions.

Changes, Additions and New Taxes added for 2013 -

  • The maximum tax rate on net capital gains and qualified dividends increased from 15% to 20% for some taxpayers beginning the 2013 tax year.
  • In addition, an additional 0.9% Medicare Tax will apply to Medicare wages, railroad retirement compensation, and self-employment income that are more than:

    $125,000 for Married Filing Separately
    $250,000 for Married Filing Jointly
    $200,000 for Single, Head of Household and Qualifying Widow(er)
  • Also, beginning in 2013, you may be subject to a New Net Investment Income Tax. This new tax is 3.8% of the smaller of

    (a) your net investment income or
    (b) the excess of your modified adjusted gross income over:

    $125,000 for Married Filing Separately
    $250,000 for Married Filing Jointly
    $200,000 for Single, Head of Household and Qualifying Widow(er)

 

First-time Homebuyer Repayment -
Homeowners who purchased their home in 2008 and received the First-time Homebuyer's credit of $7,500 on a 15 year repayment plan, are in year 4. Please remember to complete form 5405, found in the Other Taxes section, to add the repayment to your tax return.

Homeowners who purchased their home in 2010 and received the First-time Homebuyer’s credit of $8,000 have completed their 36 month, main-home, ownership requirements during 2013. If you sold or otherwise disposed of your home after the 36 month minimum ownership requirements, you are not required to repay any portion of the credit.

Homeowners who purchased their home in 2011 and received the First-time Homebuyer’s credit of $8,000 will complete the 36 month, main-home, ownership requirement in 2014.

Standard Deduction and Personal Exemption Changes in 2013 -
The Standard Deduction for each filing status has increased from the 2012 amounts. Personal Exemptions for yourself, your spouse, and qualified dependents listed on your return has also increased. The deduction and exemption amounts are automatically calculated in your account based on what you enter.


Standard Deduction

Tax Year 2013

Tax Year 2012

Single and Married Filing Separately

$6,100

$5,950

Married Filing Jointly

$12,200

$11,900

Qualifying Widow

$12,200

$11,900

Head of Household

$8,950

$8,700

Additional deduction for Single, HOH, MFS filers OVER 65 or Blind

$1,500

$1,450

Additional Deduction for Married Filing Joint and Qualifying Widow

$1,200

$1,150

Personal Exemptions

$3,900

$3,800

 

 

Maximum Earned Income Tax Credit has increased for 2013 -
The maximum amount of Earned Income Tax Credit has increased from the 2012 amounts.

Low to Moderate income workers and working families many qualify for as much as $6,044 in Earned Income Tax Credit.

The maximum income limit also increased from $50,270 in 2012 to $51,567 for married filing jointly in 2013.

This is automatically calculated based on your total earned income and number of children entered on your tax return.

 

 

Foreign Earned Income Exclusion increased for 2013 -
You may exclude up to $97,600 of qualifying foreign earned income on your 2013 tax return.

You will find this form under Other Income in the Income Menu listed as Foreign Earned Income.

You must pass either the Physical Presence Test or the Bona-fide Residence test at the time of filing in order to qualify for this exclusion.

 

 

Standard Mileage Rates for 2013 and 2014 -
The Standard mileage rates for 2013 that will apply to this year’s tax return are as follows:


Business Miles Driven

$0.565

Medical and Moving Miles Driven

$0.24

Charitable Miles Driven

$0.14


The Standard Mileage rates for 2014 that will apply to next year’s tax return are as follows:


Business Miles Driven

$0.56

Medical and Moving Miles Driven

$0.235

Charitable Miles Driven

$0.14


The mileage deduction, based on the above rates, is automatically calculated for you in your account. All you have to do is enter your miles driven and we’ll do the rest.

 

Changes in Itemized Deductions -
The deductible potion of your medical and dental expenses have been reduced to any amount paid over 10% of your adjusted gross income. This is a 2.5% increase over last year's deduction amount. However, it either you or your spouse is age 65 or older, your deductible portion will remain the same at 7.5% of your adjusted gross income.

Your itemized deductions will also be limited (reduced) if your adjusted gross income is more than:

$150,000 for Married Filing Separately
$250,000 for Single Filers
$275,000 for Head of Household Filers
$300,000 for Married Filing Jointly and Qualifying Widow(er)

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Form 1040EZ is the simplest form to fill out.
You may use Form 1040EZ if you meet all the following conditions:


If you file Form 1040EZ, you cannot itemize deductions or claim any adjustments to income or tax credits (other than the earned income credit).