New Taxes in 2013 | Michigan Elder Law Center

Much uncertainty looms about the amount of taxes we?ll pau in 2014. Filers could see a major increase unless Congress and the president agree to extend tax cuts that are set to expire at the end of December.

Here are the changes that appear relatively certain regardless of the action Congress takes:

? The personal exemption will increase, reportedly to $3,900, in 2013 from $3,800 this year.

? The maximum earnings subject to the Social Security tax will increase to $113,700 in 2013 from $110,100 in 2012.

? Contributions to defined contribution plans will climb to a maximum $23,000 ? $17,500 in regular contributions, up from $17,000 in 2012, plus $5,500 in catch-up contributions for those 50-plus, same as in 2012.

? There will be a higher threshold on medical deductions, meaning it will be harder to qualify. You?ll only be allowed to deduct medical expenses that exceed 10 percent of your adjusted gross income (up from 7.5 percent in 2012). However, if you are 65 or older, the threshold will remain at 7.5 percent. Beginning in 2017, everyone will be subject to the 10 percent limit.

? On a related note, the maximums on deductions for long-term care insurance premiums will rise. This is a tax break that many people don?t know about. But if you?re age 50 to 60, the maximum you?ll be able to deduct will rise to $1,360 (up from $1,310 in 2012); age 61 to 70, the maximum will increase to $3,640 (from $3,500); after 70, the limit will climb to $4,550 (from $4,370).

? There will be a new 3.8 percent tax on investment income for upper-income filers, as a provision of the Affordable Care Act. If you?re single and earning at least $200,000 or married, filing jointly, with an income of $250,000 or more, your unearned income (interest, dividends, annuities, investment gains and the like) will be subject to the 3.8 percent tax.

? The Medicare-funding Hospital Insurance Tax, currently at 1.45 percent, will increase by 0.9 percentage point for higher earners, another provision of health reform. The increase will apply only to income that?s in excess of $200,000 for single taxpayers and $250,000 for those married and filing jointly.

? Flexible Spending Accounts will have federally required contribution caps for the first time in 2013. These pre-tax accounts, used to pay for family medical expenses, will have a $2,500 annual cap. (Though there were no federal caps previously, most employers had imposed a $5,000 cap).

Here are some changes that could affect you in 2013 if Congress does not renew various tax cuts of recent years:

? The Social Security tax will rise to its traditional rate of 6.2 percent of covered income from the current 4.2 percent level.

? The 10 percent income tax rate will be eliminated so that filers in that bracket this year will pay 15 percent in 2013; those with income in the 25 percent bracket will pay 28 percent on that money; the 28 percent bracket will rise to 31 percent; the 33 percent bracket will go to 36 percent, with the highest rate, now 35 percent, going up to 39.6 percent. The IRS has not yet disclosed the income levels that will correspond to these tax brackets.

Contact Christopher Berry to stay current on the arising tax laws in 2013.

Read more:
http://www.aarp.org/money/taxes/info-11-2012/new-taxes-in-2013.html?sf7253515=1

Attorney Christopher J. Berry is a Metro Detroit?estate planning?and?elder law?lawyer who helps families, seniors, veterans and business owners with their important legal needs. Oakland County?estate planning lawyer, Christopher Berry is a partner in the Bloomfield Hills law firm of?Witzke Berry?PLLC. Mr. Berry practices in the areas ofestate planning, business, probate, veterans benefits &?Medicaid planning. Follow Christopher on Twitter@chrisberryesq.

Source: http://michiganelderlawcenter.com/taxes/

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