While taxes are certain in life, there is no guarantee that the rules that apply to these taxes will remain the same each year. In fact, 2013 saw a number of IRS changes that will affect many taxpayers, especially those in the upper tax brackets.
Here’s what you need to know this tax season, which opens January 31st:
If your income is above $200,000 (or $250,000 as a married couple filing jointly)…
* All or part of your net investment income may be subject to an additional 3.8% Medicare tax.
* If your income is a combination of salary and self-employment income, you will be responsible for an additional 0.9% Medicare tax (on top of the original 2.9%).
If your income is above $250,000 (or $300,000 as a married couple filing jointly or $275,000 for head of household)…
* Some personal and dependent exemptions might be cut down or eliminated.
* You may lose a portion (up to 3% of your AGI) of your write-offs for various deductions, such as home-mortgage interest, property taxes, charitable donations, and investment expenses.
If your income is above $400,000 (or $450,000 as a married couple filing jointly or $425,000 as head of household)….
* Your federal income tax rate will climb from 35% to 39.6%.
* Your income tax rates on long-term capital gains and dividends will rise from 15% to 20%.
If your individual taxable income is below $36,250 (or below $72,500 as a married couple filing jointly or below $48,600 as head of household)…
* You will pay 0% on long-term gains and dividends.
If you plan on claiming itemized deductions for personal or dependent medical expenses…
* Your expenses must have exceeded 10% of your income (previously this threshold was 7.5%). However, if you are 65 or older, this higher rate won’t take effect until the 2017 tax year.
If you are a married same-sex couple….
* You must file your federal return either as a married couple or as married-filing-separately.
Check the IRS website for a complete rundown of all tax rules this year. And happy filing!