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What to Expect in 2014

IRS Tax Changes

Apr 16 2013

Monday was the IRS tax filing deadline for 2012 taxes and we're already looking to next year. It’s not too early to examine some of the changes that will impact us when we file our 2013 taxes next April. The IRS offers this roundup of some of the differences we’ll see.

There are several changes that affect many taxpayers.

Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years.

Itemized deductions in tax years 2013 are limited for individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

Personal exemptions in tax year 2013 are subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly).

The Alternative Minimum Tax exemption for tax year 2012 is $50,600 (single) $78,750 (joint), and is adjusted for inflation thereafter.

A snapshot of Individual tax changes for 2013

Net Investment Income Tax

A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulations on the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers at www.irs.gov.

Additional Medicare Tax

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers at www.irs.gov.