The IRS released the inflation-adjusted amounts for 2013 individual tax returns.
The standard deduction increases to $6,100 single and $12,200 married filing jointly.
The personal exemption increases $100 to $3,900. Those with adjusted gross income (AGI) of more than $150,000 single and $300,000 married filing jointly will see their exemption reduced.
The maximum Earned Income Tax Credit increases slightly to $6,044.
The new 39.6% top tax rate applies to individuals with taxable income of more than $400,000, $450,000 for those married filing jointly. All other rates remain the same as 2012.
Those with AGI of $250,000 single and $300,000 married filing jointly will see their itemized deductions reduced by up to 20%.
These changes present some significant planning issues for those who will have income in any of the ranges mentioned above. We’re here to help take the guess work out of your tax situation, and to help reduce your tax exposure as much as possible.
As the end of the year approaches, there are a significant number of tax breaks and deductions remaining in limbo for businesses. Congress and the President are working to resolve these and many others before the end of the year, which is now a short three weeks away.
Below are some of those most likely to affect our readers.
The 50% bonus depreciation allowance for new equipment expires at the end of 2012.
The Research and Development Tax Credit, which expired at the end of 2011.
The 15-year depreciable life for qualified leasehold, restaurant and retail improvements, which expired at the end of 2011.
The Section 179 deduction, which allowed up to $139,000 in deductions for capital equipment placed in service in 2011, will be reduced to $25,000 (plus a small inflation increase) for 2012.
These are in addition to the individual items covered in last week’s blog posting.
The acting commissioner of the IRS has warned Congress several times that failure to resolve the expired and expiring provisions by the end of the year may delay the filing of most business and individual tax returns. Even if Congress and the President reach an agreement by year end, there may still be delays as the IRS rushes to update their computer systems, along with tax software providers.
To add to the complexity and uncertainty, most states use some form of the taxable income amount determined on the federal tax return as a starting point for state taxes. This means once the federal tax code is determined, the states will have to scramble to adopt all, some, or none, of the new federal laws and also retool their computer systems for the changes.
We’ll be keeping up on the latest, and as always, we’re here to help you navigate the ever-changing landscape.
The IRS announced December 12th that the standard mileage rate used for businesses will stay at the current level of 55.5 cents per mile for 2012.
In addition, personal and dependency exemptions on the personal return will be worth $3,800 each, and each of the standard deductions moved slightly higher as well. Also, the maximum amount of wages subject to Social Security taxes will move up $3,300, to $110,100 per person.
Debate continues to rage on extending the payroll tax holiday currently in place. We’ll stay tuned to the latest coming out of Washington.
On December 17, 2010, the US House of Representatives passed the 2010 Tax Relief Act on a bi-partisan vote. The law is expected to be signed into law by President Obama in its current form. Not a moment too soon, the Act provides for the following extensions through the end of 2012:
Income tax rates will be held at their current level
The Child Tax Credit, Earned Income Tax Credit, and American Opportunity tax credit (for higher education) have all been extended
Other elements of the bill lasting less than two years, among others, are
The AMT has been “patched” to prevent it from assessing additional tax on middle income earners. This is effective for the 2010 and 2011 tax years.
The $250.00 deduction for classroom expenses of elementary and secondary school teachers is extended for the 2010 and 2011 years.
A 2% reduction in payroll taxes for employee and self-employed individuals for 2011 only.
This means the amount of taxes withheld from an employees paycheck will decrease 2%, effectively resulting in a 2% raise in pay.
Self-employed tax payers will pay 2% less in self-employment taxes.
Expanded section 179 expensing for businesses was extended through the end of 2011, allowing businesses to deduct up to $500,000 of new asset costs in the first year.
Beginning with 2012, the act provides for 50% bonus depreciation in the first year of an asset’s use, in lieu of the expanded 179 expensing.
Additional changes were made surrounding the estate tax, and a number of other areas. Conspicuously absent was the provision to repeal the new 1099 reporting requirements.
Want more detail on how the changes will affect you or your business? Feel free to contact us!
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