How Will 2013 Taxes Affect You?
The new tax landscape looks very different than it did in 2012. How will the tax law changes affect your situation? Here is a brief summary covering some of what you can expect.
IRA charitable rollover: Donors aged 70½ or older are once again eligible to move up to $100,000 from their IRAs directly to qualified charities without having to pay income taxes on the money. You may make a gift on or before Dec. 31, 2013, to qualify for a 2013 gift. Because this legislation was enacted in 2013, Congress provided two special transitional rules for 2012 gifts:
- Qualified distributions made by Feb. 1, 2013, may be counted retroactively for the 2012 tax year.
- A taxpayer who took a distribution from the IRA in December 2012 may make a contribution to a qualified charity before Feb. 1, 2013, and treat that as a direct transfer.
Income taxes: Individual taxpayers earning more than $400,000 a year and married couples earning more than $450,000 will see a tax rate increase. The top income tax rate has been raised to 39.6 percent in 2013. The 2013 ordinary income tax rates are now 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent.
Estate, gift and generation-skipping taxes: The 2013 tax law permanently preserves the current individual gift, estate and generation-skipping tax to a unified $5 million exemption. This amount will be indexed for inflation each year. The top estate and gift tax rates will rise from 35 percent to 40 percent. The annual gift tax exclusion—the amount you can give to anyone gift tax–free each year—is now $14,000 ($28,000 for married couples).
Itemized deductions: In 2013, the Pease limitation was revived, meaning that itemized deductions, including charitable deductions, are reduced for individuals making $250,000 or more and for married couples making $300,000 or more. These amounts will be indexed annually for inflation. The Pease limitation does not apply to deductions for medical expenses, investment interest, casualty and theft losses, and gambling losses.
Personal exemptions: In 2013, personal exemptions are limited for individuals making $250,000 or more and for married couples making $300,000 or more.
Dividend income: Qualified dividend income will be taxed at a maximum rate of 20 percent.
Long-term capital gains: The capital gains tax rate will depend on a taxpayer’s ordinary income tax rate. Capital gains will be waived for taxpayers below the 25 percent ordinary income tax rate. For those taxpayers who fall at or above the 25 percent income tax rate but below the 39.6% tax rate, the capital gains tax will be 15 percent. For those at the 39.6 percent ordinary income tax rate, the capital gains tax will be 20 percent.
Portability: In 2012, if one spouse died without using up his or her federal estate tax exemption, the unused portion could be transferred to the surviving spouse. This was called a portability provision. In 2013, this portability provision was made permanent.
Charitable deduction for donating real property for conservation purposes: Taxpayers are able to take a charitable deduction for qualified conservation contributions, which are contributions of a qualified real property interest to a qualified organization exclusively for conservation purposes.
Payroll taxes: In 2013, the Social Security payroll tax will increase from 4.2 percent to 6.2 percent, meaning taxpayers will have more withheld from each paycheck.
Consult Your Tax Advisor Today Because of the numerous changes to tax laws in 2013, everyone can expect to be affected. Consult your tax advisor on what the new tax laws will do to your bottom line and how to plan accordingly.
If you are contemplating a charitable gift under the new laws, please feel free to contact Steve Maughan at 800-808-7858 or firstname.lastname@example.org with any questions you may have.
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.