The IRS has announced that instead of tracking actual expenses for your home office, beginning with your 2013 tax return (filed in Spring 2014) you can take a standard deduction for your home office. It is calculated at $5/square foot of home office space. While this will simplify the calculation and relieve some of the record keeping requirements, some have expressed concern that this understates the value of the home office and you would likely get a larger deduction if you stick with the old method of actual expenses. Those who own their homes free and clear and don't have mortgage interest may also be the ones who would benefit under this rule change.
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Congress has passed a bill extending most of the 2012 tax code into the future for most Americans. Those earnings more than 400,000 will see tax increases. This bill kept the tax rates and many credits, including the tuition and child tax credits, the same for the future. Personally I am excited to see a permanent fix to the AMT. This is an annoyance each year that Congress has to fix and it finally has been given a long term solution.
Note that the 2% payroll tax cut that we have enjoyed the last two years was not extended, so all workers will see a tax increase with your first 2013 paycheck. It could have been much worse I guess.
Details of the tax bill:
Note that the 2% payroll tax cut that we have enjoyed the last two years was not extended, so all workers will see a tax increase with your first 2013 paycheck. It could have been much worse I guess.
Details of the tax bill:
- Raises the top marginal rate to 39.6% for single filers with taxable income over $400,000 and joint filers over $450,000.
- Raises the capital gain rate to 20% for taxpayers subject to the 39.6% rate, but retains the 15% top rate for other taxpayers.
- Permanently “patches” the alternative minimum tax retroactive to 2012.
- Permanently extends the $5 million estate tax extension, including the transfer of the unused exemption of a deceased spouse, but increases the estate tax rate to 40% (from 35%)
- Re-enacts the phase-outs of personal exemptions and itemized deductions for taxpayers with AGIs exceeding $250,000 (single filers) or $300,000 (joint filers), providing a hidden and dishonest rate increase for taxpayers under the $400,000/$450,000 thresholds.
- Extends 50% bonus depreciation and the $125,000 Section 179 deduction limit through 2013.
- The special exclusion for income from cancellation of qualified mortgage debt (through 2013)
- The optional deduction for state and local sales taxes (through 2013)
- The exclusion from income of IRA donations to charity (through 2013). This one allows a “do-over” for IRA distributions received in December 2012, if they are transferred to charity before February 2013.
- Educator expenses above-the-line deduction
- Private mortgage insurance (PMI) itemized deduction
- Tuition and fees above-the-line deduction
- Many tax credits were extended for five years, including the American Opportunity Credit, the Earned Income Credit, and the child tax credit (at a higher level than in the past).
- The adoption credit was also permanently extended at a much higher rate than it was planned to drop to. The amount is still uncertain but will be at least 10,000 and is indexed to inflation Source
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Another year means new inflation adjustments to some of the key IRS figures. Here are the most popular ones that may affect you:
401K max 17,000 to 17,500
IRA (Roth or Traditional) 5,000 to 5,500
Gift tax exclusion 13,000 to 14,000
Kiddie tax exclusion 950 to 1,000
SS Wage base 113,700 to 110,100
Per Diem Limit adjustments
Source 1
Source 2
401K max 17,000 to 17,500
IRA (Roth or Traditional) 5,000 to 5,500
Gift tax exclusion 13,000 to 14,000
Kiddie tax exclusion 950 to 1,000
SS Wage base 113,700 to 110,100
Per Diem Limit adjustments
Source 1
Source 2
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Some ministers who are approaching retirement or in retirement may be interested in this article about the different housing options available to retired ministers. Keep in mind that housing allowances are not taxable income to the minister, so this can be a very good benefit to these individuals.
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Here in NC we are used to hearing about an estate tax, at the US and NC level. Some states have an inheritance tax though, and this article highlights which states have which type of laws regarding estates.
The main difference is that if there is an estate tax the estate will pay it and whatever money you receive as an inheritance has already paid any applicable taxes and you get to keep all your receive.
With an inheritance tax the person who receives the money will have to send in a portion of their inheritance. Each files and is taxed individually.
The main difference is that if there is an estate tax the estate will pay it and whatever money you receive as an inheritance has already paid any applicable taxes and you get to keep all your receive.
With an inheritance tax the person who receives the money will have to send in a portion of their inheritance. Each files and is taxed individually.
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A few years ago Congress lowered the amount of taxes that social security (FICA) is taking out of your paycheck by 2%. This was a temporary measure to stimulate the economy with extra money in our pockets (that has been extended because the economy needed more of a push and people liked the extra money).
Unfortunately the clock is ticking on this tax break, and it looks like our paychecks will be a little smaller in 2013 (Unless Congress decides to extend this even more). I doubt that will happen, because the SS Trust Fund is hurting and needs the money.
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Unfortunately the clock is ticking on this tax break, and it looks like our paychecks will be a little smaller in 2013 (Unless Congress decides to extend this even more). I doubt that will happen, because the SS Trust Fund is hurting and needs the money.
Link
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The short answer is...probably not, but this article helps explain the criteria the IRS has established to determine if your political donation is deductible or not.
Article
Article
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