Shortly after ringing in 2013, our federal government answered a number of questions we and our clients have asked about tax laws for 2013 and years to come. Almost everyone will feel an impact from rules that have changed from 2012 to 2013. Anyone who is self employed or receives a W-2 will now pay FICA-Social Security at rate of 2% higher than the previous year. Singles with income over $200,000 and married couples with income over $250,000 may be subject to either or both a .9% and 3.8% surtax on certain types of income. Singles with taxable income over $400,000 and married couples with taxable income over $450,000 will be subject to a new 39.6% tax bracket, up a few percent from the previous year.
It may all sound like bad news, but many will benefit from the extension of certain provisions that were set to expire. The 0%, 10%, and 15% capital gains rates stay in effect for a number of taxpayers. Tax brackets for many in the middle class remained largely unchanged, with minor adjustments for inflation. Although some taxpayers will experience a phase out of itemized deductions and personal exemptions, others will benefit from an extension of child tax credits and a “permanent” relief from Alternative Minimum Tax (AMT). Business owners received a very nice benefit when Congress granted them another year (2013) of being able to expense up to $500,000 of certain fixed asset purchases, with a cap of $2,000,000 of asset purchases.
As we look forward to 2013, we see a year of many changes in the tax law (more changes than we could ever cover in one blog post). We look forward to talking to our clients about these changes, helping them understand these changes and presenting them with opportunities and options to manage their tax burden. In 2012 we saw many individual taxpayers and business owners experience growth, prosperity and success. We are optimistic that 2013 will bring much of the same and we look forward to sharing these and many other experiences with our clients.
We would welcome the opportunity to discuss anything referenced in the blog or any of the recent changes in tax law with you. Please contact us at your convenience.