Advertisement
taxes

New Tax Rules That May Affect Your 2013 Return

Changes to tax rates and breaks will affect the bottom line for many taxpayers. Discover if you’ll be paying more or less this spring.

The 2013 tax filing season, which was delayed for ten days by last year’s government shutdown, officially opened on Jan. 31. But the shutdown didn’t affect the tax filing deadline: you’re still required to file your return, or file for an extension, by April 15. That means it’s time to gather your W-2s, your 1099s and receipts for your charitable contributions and get to work.

Here’s what’s new to keep in mind as you file your 2013 return:

Advertisement - Article continues below

Top earners will pay more tax on their 2013 income. Legislation enacted in January 2013 resurrected the top rate of 39.6% for taxable income over $400,000 ($450,000 for married couples). And taxpayers in this bracket will now pay a 20% rate on long-term capital gains and dividends, up this year from the maximum 15% rate for lower-income taxpayers. Congress also revived phaseouts of itemized deductions and personal exemptions for taxpayers with adjusted gross income of $250,000 or more, or $300,000 for married couples.

Separately, provisions in the Affordable Care Act could raise taxes for those who have a large amount of investment income. The ACA introduced a 3.8% surtax on unearned income, including dividends, royalties, rents and capital gains. This surtax affects single taxpayers with modified adjusted gross income of $200,000 or more, or married joint filers with MAGI of $250,000 or more. The surtax will be based on your investment income or the amount that your MAGI (which includes investment income) exceeds the threshold, whichever is less.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

Joint returns for married same-sex couples. This year, for the first time, couples who were legally married anywhere that recognizes same-sex marriage must file their federal tax returns as either married filing jointly or married filing separately. (For most couples, filing jointly results in a lower tax bill, especially if one spouse earns significantly more than the other. But dual-income couples who earn about the same amount could find themselves paying more than if they could still file as single people.)

Legally married same-sex couples who live in a state that doesn’t recognize same-sex marriages should plan on spending extra time on their tax returns this year. Those couples will be required to file joint (or married filing separately) tax returns with the IRS, but they may be required to file as single with their states. Since states typically base tax returns on federal tax returns, these couples may have to create “dummy” federal tax returns as single filers before they can complete their state tax returns. A few states that don’t allow same-sex marriage either require or permit residents to file joint returns if they were married in jurisdictions that permit same-sex matrimony. See our Guide to State Filing Status for Same-Sex Couples for details for your state.

Advertisement - Article continues below

Self-employed workers will find it easier to figure the home-office deduction. In the past, many self-employed workers rejected this money-saving deduction because it was complicated to figure and was widely viewed as an audit red flag. But a change that took effect in 2013 makes it easier to claim this tax break and lessens the chance of an audit.

Advertisement
Advertisement - Article continues below

New IRS rules allow self-employed taxpayers to deduct their home offices by using a simple formula based on the size of their offices. Under this method, you can deduct $5 per square foot, up to a maximum of 300 square feet, or $1,500.

The rule doesn’t change eligibility requirements for the deduction. You must use the space regularly and exclusively for business. If you’re an employee who works from home, you can’t deduct a home office unless your employer requires you to work there. But you’ll no longer have to fill out an IRS form listing your actual expenses, such as the percentage of utilities used in your home office. You’ll still have the option of using your actual expenses, which could deliver a larger deduction. Just be sure to save your receipts.

Advertisement - Article continues below

Itemizers face a higher threshold for medical deductions on their 2013 returns. Most taxpayers will only be allowed to deduct unreimbursed medical expenses that exceed 10% of their adjusted gross income, up from 7.5% in the past. The 7.5% threshold still applies to taxpayers who were 65 or older at the end of 2013. (On joint returns, the lower threshold applies if either spouse meets the age test.) You must itemize to claim this deduction.

Taxpayers will have to get by with less help from the IRS. If you have a question for the IRS, be prepared to wait a while. In fiscal year 2013, the IRS answered only 61% of calls from taxpayers, and the average wait time to get an answer was nearly 18 minutes, according to IRS taxpayer advocate Nina Olson. Despite increased responsibilities, the IRS has fewer employees than it had four years ago, Olson says. Taxpayers may be able to get answers to their questions at www.irs.gov; the Web site’s “Where’s My Refund” tool also allows people to track their refunds. You can check the status of your refund within 24 hours after the IRS has received your e-filed return or within four weeks after you’ve mailed a paper return.

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020

Recommended

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
Saver's Credit: A Retirement Tax Break for the Middle Class
Tax Breaks

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.
July 9, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
2020 Tax Deadline: When Are Tax Returns Due This Year?
tax deadline

2020 Tax Deadline: When Are Tax Returns Due This Year?

The April 15 deadline for filing your 2019 federal income tax return (and paying taxes) has been moved back...but the new due date is approaching fast…
July 8, 2020