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Federal Tax Law Changes 2013

January 25, 2014 by Leave a Comment

As we begin the start of the New Year, we want to remind you of some of the changes in both the Federal and State tax laws. These changes in the tax law may have an impact on your tax liability for 2013 and beyond. Because there are so many changes, we want to share some of the more noteworthy changes in effect.

Individual Tax Rates for 2013

Federal-Tax-Changes-2013


Capitol Gains and Qualified Dividends

Type of Gain Holding Period Top Rate for Tax Payer in 39.6% Marginal Tax Bracket Top Rate for Tax Payer in 25-35% Marginal Tax Bracket Top Rate for Tax Payer in 10-15% Marginal Tax Bracket
Short Term 12 months or less Ordinary income tax rate Ordinary income tax rate Ordinary income tax rate
Long Term Term More than 12 months 20% 15% 0%
Qualified Dividends 60 days or more 20% 15% 0%

Personal Exemption Phase-Out

Personal exemptions are reduced by 2% for each $2,500 in excess of the taxpayer’s AGI over:

Filing Status Threshold Amount
Married Filing Joint $300,000
Head of Household $275,000
Single $250,000
Married Filing Separate $150,000

Itemized Deduction Phase-Out

The disallowed deduction amount is equal to 3% of the excess of the taxpayer’s AGI over:

Filing Status Threshold Amount
Married Filing Joint $300,000
Head of Household $275,000
Single $250,000
Married Filing Separate $150,000

The reduction cannot exceed 80% of your Itemized Deductions. Medical expenses, investment interest, casualty and theft losses, and gambling losses are not reduced by the limitation.


Net Investment Income Tax (3.8%)

This is a new tax for 2013 that came as a result of Health Care Reform. The tax rate of 3.8% applies to certain net investment income of individuals, estates and trusts that have modified AGI above the following statutory threshold amounts:

Filing Status Threshold Amount
Married Filing Joint $300,000
Head of Household $275,000
Single $250,000
Married Filing Separate $150,000
Qualifying Widow(er) with a Dependent Child $250,000

Investment income includes: Income from interest, dividends, annuities, royalties, rents (other than those derived from a trade or business), capital gains (other than those derived from a trade or business), trade or business income that is a passive activity with respect to the taxpayer, and trade or business income with respect to the trading of financial instruments or commodities. For surtax purposes, modified adjusted gross income doesn’t include excluded items such as interest on tax-exempt bonds, veterans’ benefits, and excluded gains from the sale of a qualified principal residence.


Additional Medicare Tax (0.9%)

This is new tax for 2013 that is a result of the Affordable Care Act. The tax applies at a rate of
0.9% on wages, compensation, and self-employment income exceeding the following statutory threshold amounts:

Filing Status Threshold Amount
Married Filing Joint $250,000
Head of Household $200,000
Single $200,000
Married Filing Separate $125,000
Qualifying Widow(er) with a Dependent Child $200,000

Wages and compensation exempt from the Medicare tax are not subject to the Additional .9% Medicare Tax.

Filed Under: tax Tagged With: 2013 tax changes, Federal Tax Changes 2013, tax changes 2013, tax code changes, tax code update 2013

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Trimble and Company

4201 Brockton Ave # 100
Riverside, California 92501
United States (US)
Phone: 951-781-2910
Fax: 951-788-6135

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Company Profile:

James W. Trimble's public accounting experience goes all the way back to 1978. Now a managing shareholder of Trimble & Company, he was initially with a local firm in the Palm Springs area, until 1984 when he started his own firm in Riverside. Trimble & Company has two shareholders, three CPAs, and 15 employees in total, several of whom have been with the firm for over 20 years. Learn more...

Recent Posts

  • Upcoming Changes for our Review, Compilation, and Financial Statement Preparation Clients
  • Healthy Workplaces, Healthy Families Act of 2014: What it Means for Employers
  • New Clients: Get $50 Off Preparing Your 2014 Federal Tax Return
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  • Tax Benefits of Putting Family Members on the Payroll

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Trimble and Company
4201 Brockton Ave # 100
Riverside, California 92501
United States (US)
Phone: 951-781-2910
Fax: 951-788-6135
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