As some of you may or may not be aware, this year there are a number of tax changes slated to take effect. While none of the changes appear to be drastic or altogether too grave in nature, it’s important to take note of how they’re going to affect you, your loved ones, and your future financial planning. In this article I’ll hit on some of the most prevalent changes to the tax code, but for a complete breakdown of all the changes or ideas on how you should prepare I recommend you schedule an appointment with your financial advisor to get a complete picture of where you stand.
-Taxpayers with income greater than $400,000 ($450,000 for couples) will now face a 39.6% tax rate, up from the old 35% rate.
-Long-term capital gains tax for those earning over $400,000 ($450,000 for couples) will now be taxed at 20% instead of 15%.
-The top tax rate on estates and gifts will be raised to 40% (up from 35%)
-All earned income above $200,000 ($250,000 for couples) will now be subjected to an additional .9% Medicare payroll tax.
-There’s a new 3.8% surtax on the lesser of net investment income or modified gross income above $200,000 ($250,000 for couples) as part of the Affordable Care Act.
-Itemized deductions for taxpayers with adjusted gross income over $250,000 ($300,000 for couples) will be reduced by 3% of the amount of income over the threshold.
-The alternative minimum tax exemption has increased to $51,900 ($80,000 for couples).
-Those who don’t itemize their deductions will be able to take the standard deduction. The basic standard deduction is set to increase in 2013.
-Employee pay will drop 2% as the payroll tax holiday expires and the full 6.2% of Social Security (up to the limit of $113,700) will now be withheld from your pay.
While this is not a complete list, it should give everyone a broad overview of what your 2013 tax burden will look like. To those of you with concerns about what you’ll be paying, or if you’ve recently shifted tax brackets, I strongly recommend that you get in touch with your advisor and tax specialist so you can begin to prepare for the changes. The last thing anyone wants is a surprise come tax season.
Authored by Financial Social Media (financialsocialmedia.com)