Congress and President Obama continue to negotiate in an effort to avoid the "fiscal cliff" if the Bush tax cuts are allowed to expire at the end of the year. As a result, many features of the 2013 tax environment remain murky.
No one knows, for example, what the personal income tax rates will be in 2013. However, we do know a few things for sure: The IRS has announced many of the inflation adjustments for 2013, and employers in many states will face increased federal unemployment taxes.
2013 inflation adjustments
Every year the IRS adjusts for inflation tax brackets, tables, exemptions, thresholds and other items. The IRS has announced some, but not all, of the adjustments for 2013.
- The annual exclusion for gifts in 2013 is $14,000, up from $13,000 in 2012.
- The amount unearned income of minor children that is not subject to the "Kiddie tax" is $1,000 for 2013, up from $950 in 2012.
- 401(k)/403(b)/457 contribution limit: $17,500 (up $500 from 2012).
- The income limit for full Roth IRA contributions for 2013 is $127,000 for singles and $188,000 for married joint filers.
- The income limit for making deductible contributions to traditional IRAs rises to $115,000 from $112,000 for married couples filing jointly ($69,000 for singles) if the worker is covered by a workplace retirement plan.
- For 2013, a qualifying high-deductible health plan (HDHP) paired with a Health Savings Account must have a deductible of at least $1,250 for self-only coverage or $2,500 for family coverage, and must limit annual out-of-pocket expenses of the beneficiary to $6,250 for self-only coverage and $12,500 for family coverage. For 2013, you can contribute up to $3,250 for self-only coverage or $6,450 for family coverage. These amounts are increased by $1,000 for people over 55 years of age.
- The standard mileage rate used to calculate the deductible cost of operating an automobile for business is 56.5 cents in 2013, up one cent from 2012.
Higher unemployment taxes in some states
Employers in any of the several states that have not repaid loans from the federal unemployment fund will have to pay higher federal unemployment taxes (per the Federal Unemployment Tax Act) in 2013. Employers in Indiana will pay 0.9 percent more up to the $7,000 annual ceiling. This translates to as much as $63 extra in tax per employee. Employers in the following states will have to pay 0.6 percent more — up to $42 more tax per employee: Arkansas, California, Connecticut, Florida, Georgia, Kentucky, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Rhode Island and Wisconsin. Employers in Arizona, Delaware and Vermont will have to pay 0.3 percent more, a tax increase of up to $21 per employee.
Medicare premiums rise
In 2013, the basic Medicare Part B premium will rise to $104.90 per month, up $5 a month over the charge for this year.
Remember, if you’re self-employed, you may be able to deduct your Medicare premiums as a special personal deduction. See "How to deduct your Medicare premiums."
Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors." He welcomes your questions for this weekly column.
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