On Posted on by Louis Wolkenstein to Legislation and Regulation Affecting Investments

2013 Tax Code Changes

There are a Number of Tax Code Changes Going Into Effect in 2013. These Changes are Created by the Taxpayer Relief Act of 2012. This Law Affects Affluent High Income Earners as Well as Individuals and Families in Lower Tax Brackets. The Reset of Social Security Taxes Due to the Expiration of the Payroll Tax Cut Affects all Employees and Those Who are Self Employed.

There is Also Now an Incentive for People in the 25% and 15% Tax Brackets to Invest as the Tax Rate for Capital Gains and Qualified Dividends Falling into These Tax Brackets is 0.

Planning for These Changes is Essential So You are Not Surprised During Tax Filing Season.

Keep in Mind The Investment Advisor Does Not Provide Tax Advice or Make Tax Recommendations. The Information Below is Presented for Informational Purposes Only and Does Not Constitute Tax Advice, Tax Recommendations or Investment Advice.

The Investment Advisor Does Stand Ready to Work with You, Your Accountant and/or CPA, Attorney and other Advisors to Help Provide You with the Investment Management, Advice, Securities Recommendations and Types of Accounts of Accounts You May Need to Implement a Comprehensive, Integrated Investment Portfolio in Line with the Recommendations of Your Accountant, CPA and Attorney.

Intuit Spells Out Many of The Tax Changes Which Include but are Not Limited to:

1.  A Top Tax Bracket of 39.6% for Earnings Above $400,000 for Individuals and $450,000 for Married Couples Filing Jointly

2.  A 3.8% Medicare Tax on Investment Income Affecting Those individuals With Incomes over $200,000 and Married Couples Earning over $250,000.

3.  A 20% Tax Rate on Long Term Capital Gains and Qualified Dividends.

4.  “The Law Permanently Extends a 0% Tax rate on Capital Gains and Qualified dividends for Taxpayers Below the 25% Bracket, as Well as the 15% Rate for Other taxpayers. However, the Law Adds a 20% Rate for Gains falling in the New 39.6% bracket.

5.   A .9% Medicare Tax On Wages and Earnings Resulting From Employment or Self Employment on Incomes over $200,000 for Single Individuals and $250,000 if Married Filing Jointly.

6.  An Increase in the Taxable Wage Base Upon Which Social Security Taxes are Calculated to $113,700.

7.  Compensation subject to the Medicare portion of FICA is Unlimited.

8.  A “Sunset” of the Bush-Era Tax Cuts. The Law Makes Permanent the 10%, 15%, 25%, 28% 33% and 35% tax brackets.

9.  “The Law Permanently Extends the 0% Tax Rate on Capital Gains and Qualified Dividends for Taxpayers Below the 25% bracket, as well as the 15% Rate. However, the Law Adds a 20% Rate for Gains Falling in the New 39.6% bracket.”

10.  “For 2013, Personal Exemptions Will be Reduced by 2% for Each $2,500 (or portion thereof) of AGI above $300,000 for Joint Filers and Surviving spouses, $275,000 for heads of households, $250,000 for singles, and $150,000 for marrieds filing separately. The Total Amount of Itemized Deductions Will be Reduced by 3% of the Amount by which Adjusted Gross Income Exceeds the Same Threshold Amounts.”

11.  “For 2013, the Alternative Minimum Tax (AMT) Exemptions are $51,900 for singles, $80,800 for Joint Filers, and $40,400 for Marrieds Filing Separately. The Law Permanently Extends the Provision Allowing Nonrefundable Personal Credits to Offset the AMT.”

12.  “Tax-free distributions from IRAs for Charitable Purposes are extended through 2013”

13.  “In 2013, Health Flexible Spending Arrangements Must Limit Tax-Free Salary Reduction Contributions to $2,500 per year. The $2,500 limit is Indexed for Inflation in Future years. The Contribution Limit Carries a January 1, 2013 Effective Date; However, the IRS has Announced That Plans are Not Required to Apply the Limit Until the First Plan Year Beginning after December 31, 2012. Inflation adjustments to the Contribution Limit Will Also Apply on a Plan Year Basis.”

14.  “Medical Expense Deductions for Most Taxpayers Will be Subject to a 10% Deduction Floor—Up From 7.5% for Prior Years. However, for 2013 through 2017, the 7.5% Deduction Floor Will Continue to Apply if Either the Taxpayer or the Taxpayer’s Spouse has Reached age 65 Before the End of the Tax Year.”

15.  “The Employee Share of FICA and Self-Employment Tax is Two Percentage Points Higher than in 2012, Due to the Expiration of the Payroll Tax Holiday that Ran in 2010 and 2011. If You’re Self Employed, You Can Deduct the So-Called Employer Share (i.e., one half of self-employment tax). “

16.  Companies Can Contribute on a Tax-Deductible Basis up to $51,000 to Profit-Sharing Plans and SEPs in 2013 (up from $50,000 in 2012).

Possible Strategies for Individuals and Families With Incomes in the Top Tax Bracket May Include Deferring Income Through a Deferred Compensation Plan if You are Self-Employed or if Your Employer Offers Such a Plan.

You May Also Consider Maxing Out Your Retirement Plan Contributions. If You are Not Able to Participate in an Employer Sponsored Retirement Plan Such as a 401k Plan, 403b Plan, Profit Sharing Plan, SEP Plan or SIMPLE Plan You May Consider Maxing Out on Your IRA Contributions. Always Check with Your Accountant and/ or CPA and Attorney Regarding Your Personal Financial Situation Before Making These Decisions.

Holding Individual Stocks and Bonds May Provide You With a Greater Degree Control over Tax Related Matters as Opposed to Mutual Funds. This May Provide an Easier Way to Offset Losses Against Gains. Mutual Funds Payout Long and Short Term Capital Gains at the End of the Year.  Remember Not to Comprise a Diversified Portfolio in Which You May Need Mutual Funds, Index Funds and Exchange Traded Funds to Achieve.

You May Also Want to Consider Tax Free Municipal Bonds if They are in Line with Your Personal Financial Situation.

As With Any Type of Investing Your Specific Personal Financial Situation, Objectives, Goals and Risk Tolerance are Paramount in Making These Decisions. The Investment Advisor Recommends You Consult with The Investment Advisor, Your Investment or Financial Advisor, Your Accountant and/ Your CPA and Attorney to Advise You Regarding Such Matters.

Investing in Securities Involves Risk of Loss. You Should be Prepared to Bear These Risks. The Value of Your Investments Will Fluctuate Over Time and You May Gain or Lose Money. Past Performance is No Guarantee of Future Results.

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