Three Tax Changes for 2013
Today we will take another look at three changes that were first effective on January 1, 2013.
Individual Tax Rates
All the prior individual marginal tax rates are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers and $450,000 for married taxpayers filing jointly.
Phaseout of Itemized Deductions and Personal Exemptions
The personal exemptions and itemized deductions phaseout is reinstated at a higher threshold of $250,000 for single taxpayers and $300,000 for married taxpayers filing jointly.
For the personal exemption phaseout, the total amount of exemptions is reduced by 2% for each 2,500 by which the taxpayer's AGI (adjusted gross income) exceeds the threshold amount.
For the itemized deduction phaseout, otherwise allowable itemized deductions are reduced by 3% of the amount by which the taxpayer's AGI exceeds the threshold. However, the amount of itemized deductions is not reduced by more than 80%. Certain items such as medical expenses, investment interest and casualty, theft or wagering losses are excluded.
Capital Gains and Dividends
A 20% rate applies to capital gains and qualified dividends for individuals above the top income tax bracket threshold. The 15% rate is retained for taxpayers in the middle brackets. The zero rate is retained for taxpayers in the 10% and 15% brackets.
Don't forget today is April 30th, the due date for your Iowa tax returns, payments or first quarter Iowa estimate.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
