Key Tax Numbers for 2013

Self-employment Rate, Social Security and Medicare Rates, and Social Security Wage Base

The 2013 social security wage base is $113,700. It will be increased to $117,000 in 2014. For 2013 and 2014, the self-employment tax rate is 15.3% (social security rate 12.4% plus Medicare tax rate of 2.9%).

For 2013, the social security rate for employees and employers is 6.2% each and the Medicare tax rate is 1.45% each. No change in 2014.

New 0.9% and 3.8% Medicare Tax Effective 2013

For 2013, higher-income taxpayers may have to pay one or both of the new additional Medicare taxes. The additional Medicare tax is suppose to help pay for Obamacare.

The 0.9% tax applies to wages, other employee compensation, and net self-employment earnings exceeding:

  • $250,000 if married filing jointly
  • $125,000 if married filing separately
  • $200,000 ( all other filing statuses)

The tax applies on Form 8959.

An employer will only withhold the additional Medicare tax once wages exceed $200,000.

Net Investment Income Tax (3.8%):

The 3.8% additional Medicare tax (called the Net Investment Income Tax or NIIT) applies to taxpayers with net investment income if modified adjusted gross income (MAGI) exceeds:

  • $250,000 if married filing jointly or qualifying widow or widower
  • $200,000 if single or head of household
  • $125,000 if married filing separately

MAGI is the same as adjusted gross income (AGI) unless the foreign earned income exclusion is claimed. The foreign earned income exclusion is added back to AGI, if it is claimed, to derive MAGI (minus any above-the-line deductions or exclusions that were disallowed or allocable to the excluded foreign earned income).

Currently, the law does not provide for an inflation adjustment to the above thresholds after 2013.

If MAGI exceeds the threshold, the 3.8% tax applies to the lesser of:

  • Your net investment income or
  • The MAGI exceeding the threshold

For example, if your net investment income is $25,000 and your MAGI $10,000, the 3.8% applies to the $10,000.

Estates and Trusts:

Estates and trusts may also be subject to the net investment income tax. The 3.8% tax generally applies to the lesser of its undistributed net investment income for the year or the excess of its AGI above the annual threshold for the 39.6% bracket for an estate or trust. For 2013, the 39.6% bracket threshold is $11,950.

Grantor trusts and certain charitable trusts are exempt from the 3.8% tax.

Investment income includes:

  • taxable interest
  • dividends
  • commercial annuities
  • rents
  • royalties
  • capital gains from sales of stocks, bonds,mutual fund, or investment real estate including a vacation home
  • capital gain distributions from mutual funds
  • passive income from partnership or S corporation interests if you were a passive owner

Do not count as investment income the following:

  • Social security benefits
  • nontaxable veterans benefits
  • income from businesses, including partnerships and S corporations in which you materially participate
  • tax-exempt interest
  • distributions from traditional IRAs, Roth IRAs, 401(k) plans and other qualified retirement plans such as pension plans, 403(b) plans and qualified annuity plans
  • life insurance benefits
  • alimony

If you sell your home at a gain, treat the gain as investment income for purposes of the 3.8% tax only to the extent that is exceeds the applicable home sale exclusion, which is $250,000 for single taxpayers and $500,000 for joint filers. If the gain is excluded from income, it is not subject to the 3.8% tax.

The tax applies on Form 8960.

Personal Exemption (for yourself and each dependent)

Each Allowable Exemption: $3,900

Phaseout of Exemption for 2013:

  • Joint return/Qualifying widow(er): Starts at $300,000/ Ends at $422,500
  • Head of Household: Starts at $275,000/Ends at $397,500
  • Single: Starts at $250,000/Ends at $372,500
  • Married filing separately: Starts at $150,000/Ends at $211,250

Standard Deduction

  • Joint return and qualifying widow(er): $12,200
  • Head of household: $8,950
  • Single: $6,100
  • Married filing separately: $6,100
  • Dependents - minimum deduction: $1,000
  • Additional Deduction if Age 65 or Older or Blind:
    • Married-per-spouse, filing jointly or separately:
      • $1,200 ($2,400 for both age and blindness)
    • Qualifying widow(er):
      • $1,200 ($2,400 for both age and blindness)
    • Single or head of household:
      • $1,500 ($3,000 for both age and blindness)

Capital Gain Rates for Assets Held Over One Year

Capital Gain Rates 2013
Long-Term Capital Gain Rates for 2011 and 2012 Your Maximum Rate is-
If your top bracket is 10% or 15% 0%
If your top bracket is OVER 15% but below 39.6% 15%
If your top bracket is 39.6% 20%
Collectibles, Qualified Small Business Stock (Section 1202 50% Exclusion) or Empowerment Zone Business Stock (60% Exclusion) Taxable portion of Section 1202 gain treated as a 28% rate gain). 28%
Unrecaptured Gain from Sale of Real Estate (this rate applies to unrecaptured real estate depreciation).

NOTE:
--Unrecaptured Section 1250 gain figured on "Unrecaptured Section 1250 Gain Worksheet" in Schedule D instructions.
-- A net loss, if any, from the 28% group reduces unrecaptured Section 1250 gain
-- Effect of computation on Schedule D Tax Worksheet is to tax unrecaptured Section 1250 gain at either a 25% rate or at the regular rates on ordinary income, whichever results in a lower tax.
--The tax is figured on Schedule D Tax Worksheet and entered on Line 44 of Form 1040.
25%

Qualified Dividends Tax Rate

Qualified Dividend Rates - 2013
If Your Top Bracket Is... Your Qualified Dividends Rate is-
10% or 15% 0%
OVER 15% but below 39.6% 15%
39.6% 20%

IRS Mileage Rate:

  • Business Use:
    • 56.5 cents per mile
  • Medical and Moving:
    • 24 cents per mile
  • Charitable:
    • 14 cents per mile

Exclusion for Employer Provided Transportation

  • Transit passes and commuter vehicle transport: $245 per month
  • Qualified parking: $245 per month
  • Qualified bicycle commuting: $20 per month

IRA Contributions

  • Traditional IRA contribution limit: $5,500
  • Additional contribution if age 50 or older but under 70 1/2: $1,000
  • Deduction phaseout for active plan participant:
    • Single or head of household: $59,000 - $69,000
    • Married filing jointly, two participants: $95,000 - $115,000
    • Married filing jointly, one participant:
      • Participant spouse: $95,000 - $115,000
      • Non-participant spouse: $178,000 - $188,000
      • Married filing separately, live together, either participates:
        • $0 - $10,000
    • Married filing separately, live apart all year:
      • Participant spouse: $59,000 - $69,000
      • Non-participant spouse: no phaseout
  • Roth IRA contribution limit: $5,500
    • Additional contribution if age 50 or older but under 70 1/2: $1,000
    • Contribution limit phaseout range:
      • Single, head of household: $112,000 - $127,000
      • Married filing separately, live apart all year: $112,000 - $127000
      • Married filing jointly, or qualifying widow(er): $178,000 - $188,000
      • Married filing separately, live together at any time: $0 - $10,000

Elective Deferral Limits

  • 401(k), 403(b), 457 plans: $17,500
  • Salary-reduction SEP: $17,500
  • SIMPLE: $12,000
  • Additional contribution if age 50 or older:
    • 401(k), 403(b), governmental 457 and SEP plans: $5,500
    • SIMPLE IRA: $2,500

Education

  • American Opportunity credit limit-per student: $2,500
  • Lifetime Learning credit limit-per-taxpayer: $2,000
  • Phaseout of American Opportunity credit:
    • Married filing jointly: $160,000 - $180,000
    • Single, head of household, or qualifying widow(er): $80,000 - $90,000
  • Phaseout of Lifetime Learning credit:
    • Married filing jointly: $107,000 - $127,000
    • Single, head of household, or qualifying widow(er): $53,000 - $63,000
  • Student loan interest deduction limit: $2,500
    • Phaseout of deduction limit:
      • Married filing jointly: $125,000 - $155,000
      • Single, head of household, qualifying widow(er): $60,000-$75.000
  • Coverdell ESA limit: $2,000
    • Phaseout of limit:
      • Married filing jointly: $190,000 - $220,000
      • All others: $95,000 - $110,000
  • Tuition and fees deduction:
    • Tuition and fees deduction-tier 1 limit: $4,000
    • Income cut-off:
      • Married filing jointly: $130,000
      • Single, head of household, or qualifying widow(er) $65,000
    • Tuition and fees deduction limit-tier 2 limit: $2,000
    • Income cut-off:
      • Married filing jointly: $160,000
      • Single, head of household, or qualifying widow(er): $80,000

Long-term Care Premiums

  • Limit on premium allowed as medical expense
    • Age 40 or under: $360
    • Over 40 but not over 50: $680
    • Over 50 but not over 60: $1,360
    • Over 60 but not over 70: $3,640
    • Over 70: $4,550

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