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What is my 2013 Tax Bracket?
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Married Filing Jointly
10% for taxable income up to $17,850
15% for taxable income between $17,851 and $72,500
25% for taxable income between $72,501 and $146,400
28% for taxable income between $146,401 and $223,050
33% for taxable income between $223,051 and $398,350
35% for taxable income between $398,351 and $450,000
39.6% for taxable income above $450,000
Single
10% for taxable income up to $8,925
15% for taxable income between $8,926 and $36,250
25% for taxable income between $36,251 and $87,850
28% for taxable income between $87,851 and $183,250
33% for taxable income between $183,251 and $398,350
35% for taxable income between $398,351 and $400,000
39.6% for taxable income above $400,000
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Are Your Beneficiaries
Up to Date?
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Have you gone through a divorce? Has there been a recent birth or death in the family? If so, now is the time to review your beneficiary designations on such things as life insurance, annuities, IRAs, 401(k) and other retirement plans. Upon your death, the designated beneficiary will receive the respective asset, which occurs outside of the will probate process. For example, if your ex-spouse is still the beneficiary on your life insurance policy, he/she will receive the death benefit even if your will says your current spouse receives all of your worldly assets.
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2013
Standard Mileage Rates:
Per Mile
Business: 56.5¢
Medical or Moving: 24¢
Service of Charitable Organizations: 14¢
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Did you move or
change your email address in 2013?
Call or email the office and let us know!
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Greetings!
Now that we are more than half way through 2013, it's time to review what we're facing for taxes this year. Read on for a brief recap of what's in place for 2013 followed by an explanation of the Medicare Surtax. Also, I encourage you to take a couple of minutes to complete my annual client satisfaction survey -- just 10 quick questions:
Click link below:
2013 Client Satisfaction Survey
For those of you with tax extensions who haven't filed your tax return yet, please contact the office soon to make arrangements to have your tax return completed.
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American Taxpayer Relief Act of 2012 passed 1/1/2013
| - Income taxes.The Act keeps the "Bush" tax rates intact for individuals with taxable income under $400,000 ($450,000 for married taxpayers, $425,000 for heads of household). Income above these levels will be taxed at a 39.6% rate.
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Capital gains and dividends. The Act raises the top rate for dividends and capital gains from 15% to 20% for taxpayers who will be subject to the new 39.6% bracket.
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AMT patch The Act will permanently patch the alternative minimum tax (AMT). 2013 exemption amounts are projected to be $51,900 for single individuals and $80,750 for married couples filing jointly. AMT is an alternative tax designed to ensure that certain taxpayers pay at least some minimum amount of taxes. Regular taxable income is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state taxes or miscellaneous itemized deductions in computing AMT income.
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Deduction limitations for high-income individuals.The Act will reinstate the limitations on the personal exemption and itemized deductions (at income levels above $300,000 for married filers and $250,000 for single filers).
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Transfer taxes.The Act prevents steep increases in estate, gift and generation-skipping transfer (GST) tax that were slated to occur for individuals dying and gifts made after 2012 by setting the exemption level at $5,000,000 (and indexed for inflation in future years). However, the Act also permanently increases the top estate, gift and GST rate from 35% to 40%.
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Individual extenders for 2012.The Act extends (but in many cases only for 1 year) a host of individual provisions, including the treatment of mortgage insurance premiums as qualified residence interest, deductions for State and local general sales taxes, and the above-the-line deduction for qualified tuition and related expenses.
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Business tax extenders for 2012.Many key business tax breaks are extended including depreciation provisions, notably including bonus depreciation, and the research and work opportunity tax credits.
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Managing Medicare Surtaxes
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The Medicare surtax (3.8%) applies to Net Investment Income (NII) if Modified Adjusted Gross Income (MAGI) is greater than $250,000 for married filers and $200,000 for single filers. Modified AGI is AGI plus tax free foreign earned income. The 3.8% tax is due on the smaller of NII or the excess of MAGI over the threshold. Investment income includes interest, dividends, capital gains, annuities, royalties and passive rental income. Interest on municipal bonds and 401(k) / IRA distributions are not included in determining NII.
There are two strategies to minimize or eliminate the Medicare Surtax: 1) reduce NII and / or 2) reduce MAGI.
1) To reduce NII, consider ...
- investments that are not considered NII such as tax exempt bonds or tax deferred annuities. Investment decisions are important and should be considered only if they make sense as a part of your overall investment portfolio. In the case of tax deferred annuities, the strategy is to move the tax impact to a later year when your individual tax rate is lower and / or below the MAGI threshold. Regarding tax exempt bonds, be aware that they may generate Alternative Minimum Tax.
- moving dividend producing stocks from your taxable income portfolio to your 401(k) or IRA portfolio.
- selling loss positions in your investment portfolio if this was an investment you are not planning to hold in the long term.
2) To reduce MAGI, consider ...
- shifting wages and investments to retirement plans such as 401(k) plans and IRAs instead of current taxable income. This could be an increased contribution to your 401(k) or a deferred compensation plan.
- taking a distribution from a Roth IRA instead of a Traditional IRA. Note that while IRA distributions are not part of NII for calculating the Medicare Surtax, they are included as part of your MAGI and could put you over the threshold where the Medicare Surtax kicks in on your NII.
- if you have sizable IRA required minimum distributions (RMD) and wish to donate to a charitable entity, you can direct your a distribution to a charity and this will serve to lower your MAGI and act as an RMD.
I am happy to discuss these options with you to determine if there are opportunities to eliminate the Medicare Surtax.
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Maximize Your Social Security
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Are you planning to claim benefits as soon as you can? For many retirees, Social Security benefits represent their largest financial asset. However, retirees can permanently short change themselves by not considering the various ways to claim their benefits. If you are 55 or older, consider getting advice on this topic. Contact the office to find out how.
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As always, I am honored to handle your tax and accounting matters. Thank you for your business!
Please remember to provide your feedback by clicking on the link below:
2013 Client Satisfaction Survey
Sincerely,
Doris Cloud
This newsletter is for general guidance only, and does not constitute tax advice or professional consulting. Before any action, consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information.
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