2013 Federal Tax Changes to Be Aware Of

Itemized Medical Expense Deduction Threshold Percentage Change
As part of the Affordable Care Act, the threshold percentage for when medical expenses are included as an itemized deduction on Schedule A was changed to:

• Taxpayers under 65: 10%
• Taxpayers 65 and older: 7.5%

Basic Changes
Business Mileage Rate for 2013: 56.5 cents per mile

Bonus Depreciation: 50% rate still applies

Capital Gains/Dividends Tax Rate:

• 0% for taxpayers in 10% or 15% tax brackets
• 15% for taxpayers in 25%, 28%, 33%, or 35% tax brackets
• New 20% rate for taxpayers in new 39.6% tax bracket

Standard Deduction

• Single: $6,100
• Married Filing Jointly: $12,200

For a complete listing of the basic yearly changes for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

New Provisions Affecting Higher Income Individuals
Individual Income Tax Rates

• Added new 39.6% rate when the AGI reaches:
• $400,000 - Single
• $450,000 - Married Filing Joint
• $425,000 - Head of Household
• $225,000 - Married Filing Separate
• The 10%, 15%, 25%, 28%, 33%, and 35% brackets were made permanent

Phase-Out of Itemized Deductions and Personal Exemptions
Beginning in 2013, the taxpayer's itemized deductions and personal exemptions will begin to be reduced when their adjusted gross income (AGI) reaches the following threshold amounts:

• $250,000 - Single
• $300,00 - Married Filing Jointly
• $275,000 - Head of Household
• $150,000 - Married Filing Separately

The reduction in Itemized Deductions will be calculated as the lesser of:

• 3% of the amount over the taxpayer's threshold amount; or
• 80% of the total itemized deductions

Personal exemptions will be reduced by 2% for each $2,500 (or fraction thereof) by which the taxpayer's AGI exceeds the applicable threshold amount.

For a complete listing of what Federal provisions have changed or what extender provisions are still in effect for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

Affordable Care Act Update - Employer Reporting and Penalty Provisions Delayed for One Year

The employer penalty and reporting provisions under the Affordable Care Act have been postponed for one year until 2015. The Administration explained that this delay was necessary in order to simplify the reporting requirements and to give employers more time to adapt their reporting systems and become familiar with the affordability and minimum value standards for the health insurance plans they offer their employees.

This means that for 2014, employers with 50 or more full-time employees will not be subject to a penalty if they do not offer health insurance to their employees, or if they do offer insurance and they fail to meet the affordability and minimum value standards.

Also for 2014, the employer reporting requirements relating to the health insurance an employer offers their employees will be voluntary. The employer reporting requirements will be required beginning in 2015.

It is important to note that this postponement of the employer penalty and reporting provisions does not affect the requirement that all individuals must obtain health insurance for themselves and their family beginning in 2014.

For more information, see the following:

• IRS Notice 2013-45 - Transition Relief for 2014 Under Sec 6055 and 6056 (Information Reporting) and Sec 4980H (Employer Shared Responsibility Provisions)
• July 2nd U.S. Department of Treasury Notes (Continuing to Implement ACA in a Careful, Thoughtful Manner)
• January 2nd White House Blog (We're Listening to Businesses About the Health Care Law)