Q. I am preparing my 2013 tax, what are the major tax changes in 2013?
A. Compared with 2012, the following are the major tax changes in 2013:
Payroll Taxes
In 2013, the payroll tax rate is 6.2% (vs the 2012's 4.2%). Furthermore, this new payroll tax rate applies to 3.3% more of your income than the old tax; $113,700 in 2013 versus $110,100 in 2012.
Income Taxes
In 2013, there is a new 39.6% top marginal income tax rate, this is 13% higher than the 2012's old 35% rate, for those making $400,000 (single) or $450,000 (couples).
Medicare Taxes
In 2013, there is a new 0.9% Medicare tax applies to those making $200,000 (single) or $250,000 (couples).
Exemptions and Deductions Reduced
The 2013 new law phases out exemptions and deductions for those making $250,000 (single) or $300,000 (couples).
Taxes on Capital Gains, Dividends and Interests
This is important - there is a new 2013 20% long-term capital gains and dividends tax rate, in the past, the highest is 15%, this is for those making $400,000 (single) or $450,000 (couples).
The 2013 new investment surtax on capital gains, dividends and interest applies to those making $200,000 (single) or $250,000 (couples). The combined 2013 new 23.8% tax rate is 59% more than the 2012 old 15% rate (note: the surtax did not apply in 2012).
Estate Taxes
The 2013 new 40% estate tax rate is 14% higher than the 2012 old rate, for those with at least $5.25 million in assets (indexed for inflation).
Fortunately, there is estate and gift tax exemption portability approved in 2013, which means that spouses can transfer their unused $5.25 million estate and gift tax exemption to each other, effectively creating a combined $10.5 million estate tax exemption. Unfortunately, a number of states are still ‘out for blood’ in the form of their own state estate taxes. Examples of those states and their lower exemption amounts include New Jersey at $675,000 and New York at $1 million.
A. Compared with 2012, the following are the major tax changes in 2013:
Payroll Taxes
In 2013, the payroll tax rate is 6.2% (vs the 2012's 4.2%). Furthermore, this new payroll tax rate applies to 3.3% more of your income than the old tax; $113,700 in 2013 versus $110,100 in 2012.
Income Taxes
In 2013, there is a new 39.6% top marginal income tax rate, this is 13% higher than the 2012's old 35% rate, for those making $400,000 (single) or $450,000 (couples).
Medicare Taxes
In 2013, there is a new 0.9% Medicare tax applies to those making $200,000 (single) or $250,000 (couples).
Exemptions and Deductions Reduced
The 2013 new law phases out exemptions and deductions for those making $250,000 (single) or $300,000 (couples).
Taxes on Capital Gains, Dividends and Interests
This is important - there is a new 2013 20% long-term capital gains and dividends tax rate, in the past, the highest is 15%, this is for those making $400,000 (single) or $450,000 (couples).
The 2013 new investment surtax on capital gains, dividends and interest applies to those making $200,000 (single) or $250,000 (couples). The combined 2013 new 23.8% tax rate is 59% more than the 2012 old 15% rate (note: the surtax did not apply in 2012).
Estate Taxes
The 2013 new 40% estate tax rate is 14% higher than the 2012 old rate, for those with at least $5.25 million in assets (indexed for inflation).
Fortunately, there is estate and gift tax exemption portability approved in 2013, which means that spouses can transfer their unused $5.25 million estate and gift tax exemption to each other, effectively creating a combined $10.5 million estate tax exemption. Unfortunately, a number of states are still ‘out for blood’ in the form of their own state estate taxes. Examples of those states and their lower exemption amounts include New Jersey at $675,000 and New York at $1 million.
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