The 2012 tax-filing season is over for most of us, but don’t put away the aspirin just yet, at least not until you’ve taken a moment to think about your 2013 taxes.
Congress has enacted a number of changes to the federal tax code that apply to the tax returns you’ll be agonizing over next year. Some of the changes might be enough for some taxpayers to consider changing the amount they have withheld from their paychecks or the size of their estimated tax payments.
Many taxpayers will see their taxable income reduced by at least $100 for 2013. The personal exemption you use to lower your income before calculating your taxes has been increased from $3,800 to $3,900 for yourself and your spouse if you file taxes together, and for each dependent.
Couples filing joint returns with adjusted gross income of more than $300,000 and single filers earning more than $250,000 will receive lower personal exemptions. For each $2,500 of earnings over those thresholds, the personal exemption is reduced by 2 percent.
What Uncle Sam gave with one hand he is taking away with the other. You will have to have significantly higher medical bills in 2013 to get a deduction. For 2012 you could deduct medical expenses that exceeded 7.5 percent of your adjusted gross income. For the 2013 tax year you can deduct only the medical expenses that exceed 10 percent of your AGI.
More earnings are subject to Social Security tax this year. The income level is going up from $110,000 to $113,700.
Higher-income earners will see several changes when they start working on their 2013 taxes.
The biggest single change is an increase in marginal tax rates. The tax on income over $450,000 for married couples filing jointly and over $400,000 for single taxpayers increases this year from 35 percent to 39.6 percent. The marginal tax rate on long-term capital gains for those high-income earners goes from 15 percent to 20 percent.
Two new taxes are imposed on couples filing jointly who earn more than $250,000 and on single taxpayers earning more than $200,000.
The first is a Medicare payroll tax. High-income taxpayers will owe an additional 0.9 percent to support Medicare on earned income over $250,000 for joint filers and $200,000 for single filers. That means taxpayers who owe the additional tax will pay 1.45 percent on the first $200,000 or $250,000 of earned income, then 2.35 percent on amounts over those thresholds.
The second is a surtax on net investment income, also designed to support Medicare. Those same high-income taxpayers will owe a 3.8 percent surtax on the lesser of either their net investment income for the tax year or on the amount by which their modified adjusted gross income exceeds those $200,000 and $250,000 income thresholds.
The tax code is also phasing out some itemized deductions for single filers with adjusted gross income above $250,000 and for joint filers with an AGI above $300,000. The value of itemized deductions is reduced by 3 percent of the AGI above those thresholds. The phase-out applies to mortgage interest, state income and sales tax, home office and some other deductions. The new rule explicitly excludes from the phase-out some medical expenses, investment interest, and casualty, theft and gambling losses.
Though the 2012 tax season for most of us ended April 15, the Internal Revenue Service estimates 74,600 New Mexicans have asked for more time to file their 2012 tax returns. By filing Form 4868 taxpayers got until Oct. 15 to file the returns. However, they were required to pay any taxes they owe by April 15.
Other taxpayers have extra time to file because of special circumstances. Taxpayers living and working abroad and military members on duty outside of the United States have until June 17 to file, though tax payments were due April 15.
Military members serving in combat zones can wait to file their returns 180 days after they leave the combat zone.
The IRS also offers several programs to help taxpayers who are having trouble paying their taxes.
You can go to the IRS.gov website and set up a monthly payment schedule that gives you up to 72 months to pay your bill, provided you owe $50,000 or less in combined tax, penalties and interest.
The IRS can also work out agreements with taxpayers to settle for less than the full amount owed. The IRS assesses what you can pay based on your income and assets.
WHAT’S AHEAD NEXT YEAR
Income level rises to $113,700 from $110,000
Only the medical expenses that exceed 10 percent of your adjusted gross income are deductible
Value is reduced by 3 percent for single filers with adjusted gross incomes more than $250,000 and joint filers above $300,000
Rises to $3,900 from $3,800
Falls 2 percent for every $2,500 for couples and single filers with incomes more than $300,000
Medicare payroll Tax
Rises .09 percent on earned income over $250,000 for joint filers and $200,000 for single filers.
MARGINAL TAX RATES
Rises to 39.6 percent for married couples filing jointly on incomes over $450,000 and single filers earning more than $400,000
Rises to 20 percent on long-term capital gains