2013 Deduction and Income Limits

This is the second in a two part series on the 2013 inflation adjusted limits released by the IRS last week.

  • The annual amount allowed to be given as a gift without requiring a gift tax return increased to $14,000 for 2013, up from $13,000 for 2012.
  • A high deductible health plan for HSA purposes must have
    • A minimum annual deductible of $1,250 for self-only coverage, and $2,500 for family coverage.
    • A maximum annual deductible and out of pocket expense limit of $6,250 for self-0nly coverage and $12,500 for family coverage
  • The maximum HSA contribution allowed in 2013 is
    • $3,250 for self-only coverage ($4,250 for those age 55 or over)
    • $6,450 for family coverage ($7,450 for those age 55 or over)
  • The adjusted gross income at which eligibility for Roth IRA contributions begin to phase out is $112,000 for single filers, $178,000 for those married filing joint.
  • Roth IRA contributions are not allowed for those with AGI of $127,000 and above for single filers, and $188,000 and above for those married filing joint.

We expect more updates to be released in the coming months, and we’ll bring them to you as they are available.

2013 Retirement and Social Security Limits

The IRS recently released the limits to be used for retirement contributions and the amount of wages subject to Social Security taxes in 2013.

  • The maximum amount of wages subject to Social Security tax is $113,700, up from $110,100 in 2012.
  • The maximum 401(k) deferral by an employee will be $17,500, up from $17,000 this year.  Those age 50 or older can contribute up to $23,000 next year.
  • Up to $5,500 can be contributed to both traditional and Roth IRA accounts next year, with those age 50 or older able to contribute up to $6,500.
  • Those using SIMPLE IRA accounts will be allowed to defer up to $12,000, with those age 50 or older able to defer up to $14,500.

This is the first in a two part update on the 2013 limits.  We’ll bring the rest to you next week.

Tax Planning – A Tricky Proposition

This time of year we start talking to our clients about tax planning, but this year things are taking a somewhat different twist.  With the November elections still to be determined, and additional parts of the Affordable Care Act going into effect in 2013, below are a couple of new things we’re thinking about this planning season.

  • Are you considering selling stocks, bonds, or investment real estate at a considerable gain?  If so, you may want to consider doing it at the end of 2012, because in 2013, you may find yourself paying an additional 3.8% tax on those gains.
  • If you own a business, are you considering a bonus for yourself?  If so, doing that in 2012 may save you from paying an additional .09% in Medicare tax which goes into effect for certain taxpayers in 2013.
  • If you’re under age 65, it may pay to push as many deductible medical expenses into 2012 as possible, as less of them will be deductible in 2012.

These are just a few of the items in the wind for the end of this year.  If you’re a client of ours, expect to see a tax planning letter with even more ideas in the coming weeks.

The Deadline is Approaching!

The post this week is a quick one.  If you extended your personal tax return, it’s due a week from today, with no more extensions available.  This deadline tends to sneak up on people.

After that deadline passes, we’ll be turning to year end planning for many of our clients.  Taking an hour or two to discuss taxes this fall will make next spring a far less surprising time, and allow us to help proactively plan for year end taxes.

As always, we’re here to help.

AMT – What Is It, and Why Should You Worry?

The Alternative Minimum Tax (AMT) is something most people know nothing about. AMT was created in 1982 to assure that high-income individuals didn’t escape paying federal taxes..

The issue is simple:  the income level at which the AMT comes into effect wasn’t “indexed for inflation”, that is, it wasn’t designed to increase over time as wages and prices did naturally.  The result?  Someone who was considered “high-income” in 1982 is considered very middle-class today.  That income amount for married taxpayers?  $45,000.

Income for AMT is calculated differently than for normal income taxes, and the rates are sky high – 26-28%.

Unless Congress passes a law adjusting that income threshold by the end of the year, the Congressional Research Service estimates 30 million taxpayers will be hit by the AMT – many of them middle income, average people.

We’ll keep an eye on Congress and bring you the latest.