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Some Important Tax News For 2013
Posted By Joseph S. Reisman On November 15, 2012 @ 1:00 pm In News & Features | 2 Comments
Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
Despite the inaction of Congress, some changes are known for next year:
Tip #1: FICA Max Rises To $113,000
The Social Security Administration has announced that the maximum earnings subject to the 6.2 percent FICA tax rises to $113,700 for 2013 from the 2012 maximum of $110,100. This includes your 12.4 percent retirement portion of the self-employment tax.
The temporary reduction to 4.2 percent of the employee FICA is not expected to be renewed, meaning that if you are at the maximum earnings, your FICA tax rises by $2,425.
There is no change in the 2.9 percent Medicare tax split between employees and employers. This tax has no wage or self-employment income cap.
Tip #2: 2013 401(k) Max $17,500; IRS Issues Updated Retirement Plan Limits
The IRS has announced the inflation adjustments to retirement plans for 2013. Some highlights:
Tip #3: Annual Per-Donor Gift Tax Exclusion Rises
For 2013, the gift tax exclusion rises to $14,000 from the current $13,000. (Please don’t forget your tax preparer.)
Tip #4: Eligible Long-Term Care Premium Deduction For 2013
Age Before December 31: Premium Deduction:
40 or less: $360
More than 40 but not more than 50: $680
More than 50 but not more than 60: $1,360
More than 60 but not more than 70: $3,640
Over 70: $4,550
Tip #5: Social Security Earnings Test
Earnings needed to earn one Social Security Credit: $1,130 | $1,160
Under full retirement age: $14,640/yr | $15,120/yr
Lose $1 for every $2 above the limit: $1,220/mo | $1,260/mo
Year You Reach Full Retirement Age (FRA):
Only for months prior to FRA: $38,880/yr | $40,080/yr
Lose $1 for Every $3 above the limit: $3,240/mo | $3,340/mo
Tip #6: Traditional IRA Contributions
A traditional IRA might provide you a tax deduction for the year in which you contribute.
You can contribute $500 more to both traditional and Roth IRAs next year, increasing the limit for both types of accounts in 2013 at $5,500. This means that you can earn more, and still take advantage of a traditional IRA.
If you are a single or head-or household, your phaseout earnings increases by $1,000, to between $59,000 and $69,000.
If you are a married couple, and your spouse is contributing to an IRA, and is covered by a workplace retirement plan, your phaseout earnings increases by $3,000, to between $95,000 and $115,000.
If you are a married couple, not covered by a workplace retirement plan, but your spouse does have a 401(k), your phaseout earnings increases by $5,000, to between $178,000 and $188,000.
Remember, you still can roll over money from a traditional IRA to a Roth regardless of your AGI. But you’ll owe taxes on converted amounts.
Tip #7: Roth IRA Contributions
A Roth isn’t deductible, but when you take the money from this account in retirement you won’t owe any taxes
You can contribute $500 more to both traditional and Roth IRAs next year. That increase puts the limit for both types of accounts in 2013 at $5,500.
The Roth contribution limit is also increased for 2013.
If you are a single or head-or household, your phaseout earnings increases by $2,000, to between $112,000 and $127,000.
If you are a married couple, your phaseout earnings increases by $5,000, to between $178,000 and $188,000.
If you are a married, but filing separately, and covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
If you make more than the top earnings amount for your filing status, you can’t contribute at all to a Roth.
Tip #8: Retirement Savers Credit
The retirement savers credit is a double tax break. You get up to $1,000 for putting money into a retirement plan, and you also receive a dollar-for-dollar reduction to your tax liability.
The limit here is based on your filing status and your AGI.
For 2013, these limits are:
If you qualify, definitely contribute to a retirement account next year and then claim your saver’s credit on your 2013 return.
Final Note: In case you missed my newsletter, the year is almost over. I hope you’re having a good year. We know many are not. There’s still time for year-end planning. Don’t be scared — planning will not hurt you.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.
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