2013 Tax Changes?

No Gravatar

It’s that time of year again.  Tax planning- which really should occur all year long, but so many of you love to wait until now.  Which could be a little late, but let’s hope not too late.

(By the way, this was written BEFORE the election.  However, I promise you- no matter who wins- taxes are going to go up.  There is no way we can survive as a nation without that coming to pass.  Investment taxes are among those most likely to survive the election.)

I already mentioned on this blog the new 3.8% tax surcharge that will be imposed on investment income. This also includes real estate rental income.   Of course, this surtax only applies to those whose total taxable income (adjusted gross income is the proper term) exceeds $ 250K (or $ 200K for singles). In addition, for those in that same tax bracket, the employee portion of Medicare taxes will increase by 0.9%.  (There is no corresponding rise in the employer paid portion for this income bracket.) And, assuming the tax rules are not changed, the maximum tax rates will rise to 39.6%.  Moreover, the qualified dividend tax rate will no longer be 15%, but rise to the ordinary income tax rate that obtains (which could be as a high as 39.6%, above.).  Couple that with the rise in long term capital gains taxes to 20%, and many folks’ tax nibble will be a real bite.

There also is a return to the Pease Limitations.  These were  limitations on itemized deduction that were eradicated in 2010, but unless extended, will return in full force in 2013.  (This is, in essence, a tax surcharge for the upper income taxpayers at their marginal rate for 3% of their total itemized deductions found on Schedule A, except for health care expenses.) The personal exemption reduction starts at lower levels of income, as the table below demonstrates. Personal Exemption Phaseout, 2013 For those of us who are engaged in business, our depreciation costs can rise dramatically.  Bonus (50%)  depreciation provisions will disappear and the Section 179 expense write-off (in a single year, as opposed to depreciating items over the expected life of the item) will decrease to a maximum of $ 25K, from the current maximum of $ 139K.

These changes mean you should strongly consider taking any gains in stocks or investments this year, when the tax rate is much lower.  And, if you are considering purchasing capital items in your business, now is the time to proceed- rather than next year when your options are more limited.

If you wish a personalized assessment, contact us as soon as possible.  There are only 45 days left to this calendar!

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter
Share

16 thoughts on “2013 Tax Changes?”

  1. Yuck! No tax talk yet. Please….. wait till after the holidays. I’m glad you are there for people but I hate talking about it.

    1. The big problem with that concept Shawn is that the $ 50K you thought you would be making on that stock sale will turn out to be $ 39K….
      So, this is the time to take that BIG breath- and deal with the issues… Because it’s almost already too late!

  2. Strange as it may sound to watchers of current events, tax increases are the conservative thing to do when government debt is on the rise. The responsible thing to do, too.

  3. I have an excellent tax person, who keeps up with, and makes me keep up with these new things. Personally, I’ve always been more in favor of a 10% flat tax system but I know I know…I’m crazy for that. At least that’s what most people tell me. I just know the more laws mean more loopholes.
    Lisa Brandel recently posted..For The Trees by Lisa Brandel

    1. Glad to hear the first sentence, Lisa.
      re: the second- it would take closer to a 28.1% flat tax to keep our treasury constant (unless you don’t want to include social security/medicare as part of that tax.) Now, what do we do with the folks making less than 30K per family? How can they now survive?

  4. As a real estate investor, I’m not happy about the tax changes. Taking broken down and vandalized homes and creating quality properties is a win/win for everyone. The neighborhood benefits, families have a nice place to live and as an investor, I get (or used to get) a tax break. I agree with Shawn that it’s too early to think about taxes. 🙂
    lisa kanarek recently posted..5 Ways to Make Video Conference Calls More Productive

    1. Yes, I sold all my holdings, too. I was worried that the tax bite would be too much next year, so I wouldn’t be able to cruise the ocean blue for ten months…
      Nevertheless, the facts are that we must plan properly, Ann..

    1. Actually, Alessa, my clients have been adequately prompted throughout the year that there really have been no surprises. And, not surprisingly, most of my
      “high means” clients have found that “proper planning precludes p… poor results….such as the issues discussed yesterday and last week with the real estate provisions…

    1. Yes, there are always plenty of changes- even if one thinks the law had not changed. That also includes the emphasis the IRS decides to employ in any given year, Janette.
      Thanks for the visit- and the acknowledgment.

    1. Samantha…
      It’s a full-time job to try to prognosticate. And, even then, it’s not foolproof. But, I have to advise my clients to garner the best possible results- so study, study, study, is the name of the game.

Comments are closed.