January 14, 2014
Tax filing season is finally here. It is time to pull together your information for the last year and review your Form 1040 from 2012. When looking at the 1040 Form for 2013, you will notice some changes in certain areas, due to adjustments in the IRS tax rules. Below is an outline of these changes:
- New higher tax rates for upper-income individuals. For most taxpayers, their tax rate will remain unchanged for 2013. There have been no changes to the current 10%, 15%, 25%, 28%, 33% and 35% rates. The change comes for those taxpayers who had an income of over $400,000, as a result of the American Taxpayer Relief Act. The ATRA also affects the tax rates on long-term capital gains and dividends. Individuals with an income over $400,000 will see an increase from last year.
- New 3.8% Medicare surtax on investment income collected by upper-income individuals. Beginning this year, all or part of a taxpayer’s net investment income, including long-term capital gains and dividends, can potentially be taxed an additional 3.8% Medicare contribution tax.
- New 0.9% Medicare surtax on salaries and self-employment income earned by upper-income individuals. In 2012, the Medicare tax on salary and self employment income was a flat 2.9%. For employees, this was paid in part by the employee and in part by the employer. Self-employed individuals paid the full 2.9%. Starting in 2013, both employees and self-employed individuals will see an increase of 0.9% in Medicare surtax if 1) salary and SE income is above $200,000 for single individuals, 2) combined salary is above $250,000, and 3) salary or SE income is above $125,000 for those married but filing separate.
- New personal dependent exemption deduction phase-out rule for upper-income individuals.
- New itemized deduction phase-out rule for upper-income individuals.
- New higher threshold for itemized medical expense deductions.
- Members of legally married same-sex couples must file as married individuals. It should be noted that same-sex couples who have entered into a civil union or domestic partnership are still treated as unmarried individuals for federal tax purposes.
To read the entire article, please visit money.msn.com.