What’s New for 2013 Tax Returns (Due in April 2014)?

What's New for 2013 Taxes2013 has been quite an active year in terms of changes to the federal tax law.   However, the bulk of the changes will only impact those people who earn at least $200,000. Below is a highlight of the most common tax laws that are either new, continuing from a prior year, or scheduled to expire.

Same-Sex Couples

Legally married same-sex couples must file their 2013 tax returns using either the filing status Married Filing Separate or Married Filing Jointly.  There is no longer any distinction in the federal tax law between same-sex couples and heterosexual couples.  However, same-sex couples can only file their state returns jointly in states that recognize the validity of same-sex marriages.

Increased Medical Expense Deduction Limitation

Only amounts exceeding 10% of an individual’s adjusted gross income can be used as an itemized deduction.  However, the old 7.5% threshold remains unchanged through 2016 for individuals age 65 and over through 2016.

Increased Exemption Amount ($100)

The amount you can deduct for each exemption has increased by $100 to $3,900.  This amount may be limited for those earing at least $250,000 (or $150,000 if married filing separately).

Standard Deductions Increase ($150 – $400)

Standard deductions increased between $150 and $300 depending on filing status.  2013 standard deductions are listed below.

Filing Status Standard Deduction Additional Deduction if 65 or Older Additional Deduction If Blind
Single/Married Filing Separate $6,100 $7,600 Add $1,500
Married Filing Jointly $12,200 $13,400 if one spouse is at least 65, $14,600 if both are at least 65 Add $1,200
Head of Household $8,700 $10,450 Add $1,500

 Child Tax Credit ($1,000)

The child tax credit remains $1,000 for each child dependent under the age of 17.

American Opportunity Credit ($2,500)

 A credit up to $2,500 per student is available for the first four years of undergraduate education.  This credit has been extended through 2017.

Student Loan Interest

Many individuals are able to deduct up to $2,500 in student loan interest paid during the year on qualified student loans.

First-Time Homebuyer Tax Credit Repayment

Certain individuals who participated in the First Time Homebuyer Tax Credit between 2008 and 2010 will continue to need to pay back all or a portion of their tax credit.  See IRS website for more specifics.

Energy Credit

A 10% credit for qualified energy efficiency improvements to a primary home is available.  The total cumulative cap is $500 ($200 for windows) for all years after 2005.

Earned Income Tax Credit (EITC) ($153)

The amount of Earned Income Tax Credit for taxpayers has increased by $153. Filers can claim up to three (3) children and earn higher levels of income before phasing out of the credit.  The maximum credit for three children claimed during 2013 is $6,044.

Deductible Vehicle Mileage

The following rates apply to most vehicles used for the purposes listed below during 2013. 

Purpose
Charitable 14 cents
Business 56.5 cents
Medical/Moving 24 cents

Additional Medicare Taxes

An additional .9% tax will be imposed on earned income exceeding $200,000 (or $250,000 for married filing jointly filers).  In addition, a 3.8% tax will be imposed on the lesser of net investment income or the amount that exceeds the established thresholds – $125,000 if married and filing separately, $200,000 if filing single, or $250,000 if filing jointly.

Itemized Deductions Limitations

Some individuals earning incomes in excess of $250,000 (or $150,000 if married filing separately) may be subject to having their itemized deductions limited up to 80%.

Expiring Tax Deduction and Credits

Unless legislation is passed during 2014, the following deductions and credits will not be available to be claimed on 2014 tax returns.

Mortgage Insurance Premiums

Currently, individuals are able to deduct mortgage insurance premiums paid on mortgages taken out after 2006.  This deduction will no longer be available effective with the 2014 returns as the law currently stands.

Cancellation of Home Mortgage Debt

Previously, individuals were allowed to exclude all or a portion of debt cancelled or forgiven related to a mortgage on their primary home.  This deduction will no longer be available effective with the 2014 returns as the law currently stands.

Tuition and Fees Deduction

Currently, individuals are able to deduct up to $4,000 in tuition and fees paid to eligible colleges and universities.  This deduction will no be longer available effective with the 2014 returns as the law currently stands.

Educator Expenses

Currently, teachers and educators are generally allowed to deduct up to $250 of the cost of classroom supplies.  This deduction will no longer be available effective with the 2014 returns as the law currently stands.

Sales Tax Deduction

Previously, individuals were given the choice to either deduct state income tax or state sales tax as an itemized deduction.  This deduction will no longer be available effective with the 2014 returns as the law currently stands.                                                                               

Related Articles

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IRS List of Tax Deductible Expenses: Itemized Miscellaneous Deductions

Guide for Choosing a Tax Preparer

Standard Deductions vs. Itemized Deductions:  Which Deduction is Better for Tax Returns?

 

The information contained within this article is for general guidance only. As such, it should not be used as a substitute for consulting with professional accounting, tax, legal or other competent advisers. 

 

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