In recent months we have been putting up a lot of blog posts discussing tax changes that will take place in 2013, unless Congress acts by year-end. Here is a list of some of the biggest changes in tax rules that 2013 will bring:
SOCIAL SECURITY TAXES- Employee’s share will increase to 6.2% after 2012, up from 4.2%.
INCOME TAX RATES- 2012 rates of 10%, 15%, 25%, 28%, 33%, and 35% will change to 15%, 28%, 31%, 36% and 39.6% for 2013.
CAPITAL GAINS- Maximum long-term rate will increase from 15% to 20% after 2012.
DIVIDENDS- Top 15% rate will be eliminated; dividends will be taxed as ordinary income with a top rate of 39.6%.
CHILD TAX CREDIT- Current $1,000 credit per qualifying child will be reduced to $500 after 2012.
AMT- Exemption amounts will be $33,750 for singles, $45,000 for couples.
ESTATE TAX- Top 2013 rate will increase to 55% (up from 35%); exclusion amount will be reduced to $1,000,000 (down from 2012 amount of $5,120,000).
DEDUCTIONS & EXEMPTIONS- After 2012, higher-income taxpayers will again lose a portion of itemized deductions and personal exemptions.
DEPRECIATION- Section 179 expensing limit will be reduced to $25,000, with a total qualifying property limit of $200,000, down from 2012 levels of $139,000 and $560,000 respectively. 50% bonus depreciation will expire.
EDUCATION- Education savings account contribution limit will be $500, down from 2012 limit of $2,000. Expanded American Opportunity Credit will expire and be replaced by prior Hope Credit.
TAX EXTENDERS- These tax breaks expired at the end of 2011: Teachers’ classroom expense deduction, state and local sales tax deduction, tax-free charitable IRA distributions for those 70½ and older, higher education tuition deduction, business R&D credit, and 15-year depreciation for leasehold improvements and restaurant property.
Congress and President Obama may agree to extend or revise some or all of these provisions, but it is important to prepare yourself for some of these changes as your paychecks, after taxes, could be drastically different next year. If you have any questions give us a call.