New rules to consider when filing your 2013 income tax return

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While most individuals will pay taxes based on the same federal income tax rate brackets that applied for 2012, a new 39.6% federal income tax rate applies for 2013 if your taxable income exceeds $400,000 ($450,000 if married filing jointly, $225,000 if married filing separately). If your income crosses that threshold, a new 20% maximum tax rate on long-term capital gain and qualifying dividends now generally applies.

If your wages exceeded $200,000 in 2013, you were subject to an additional 0.9% Medicare payroll tax. If you’re married filing jointly, the additional tax kicks in once the combined wages of you and your spouse exceed $250,000 ($125,000 if married filing separately).

If your adjusted gross income (AGI) exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately,) some or all of your net investment income may be subject to a 3.8% additional Medicare contribution tax on unearned income. Additionally, high-income taxpayers will see new limitations on itemized deductions, and a possible phase-out of personal and dependency exemptions.

New home office deduction rules

If you qualify to claim a home office deduction, stating in 2013, you can elect to use a new simplified calculation method. Under this optional method, instead of determining and allocating actual expenses, you simply multiply the square footage of your home office by $5. There’s a cap of 300 square feet, so the maximum deduction is $1,500. Not everyone can use this method, and there are some potential disadvantages.

Same-sex married couples

Same-sex couples legally married in jurisdictions that recognize same-sex marriages will be treated as married for all federal income tax purposes, even if the couple lives in a state that does not recognize same-sex marriage. If this applies to you, and you were legally married on December 31, 2013, you’ll generally have to file your 2013 federal income tax return as a married couple—either jointly or separately.

2013 IRA contributions — still time

You generally have until April 15 to contribute up to $5,500 (6,500 if you’re age 50 or older) to a traditional or Roth IRA for 2013. With a traditional IRA, you may be able to deduct your contribution (if you or your spouse are covered by an employer plan, your ability to deduct some or all of your contribution depends on your filing status and income). If you make contributions to a Roth IRA, there’s no immediate tax benefit, but qualified distributions you take in the future are completely free form federal income tax.

Filing for an extension

If you’re not going to be able to file your federal income tax return by the due date, file for an extension using IRS Form 4868. Filing this extension gives you an additional six months to file your return. It does not, however, give you additional time to pay any taxes due. Special rules apply if you’re living outside the country, or serving in the military outside the country on April 15, 2014.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

 

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