Ten New Tax Changes That You Should Be Aware of Before Filing Your 2013 Tax Return
The new tax season has arrived! The IRS will not start processing tax returns until January 31, 2014 but taxpayers are still encouraged to begin preparing their returns in anticipation of the processing date.
There are numerous tax law changes that will affect the filing of the 2013 tax return. Here’s a look at some of the tax law changes that took effect in 2013 and how they may impact your return:
1. The Child Tax Credit of a maximum of $1,000 per child under age 17 is now permanent. If your income is greater than $110,000 (married filing joint), $75,000 (single, head of household or qualifying widow(er) or $55,000 (married filing separately) the amount of the credit you can take will be limited.
The part of the Child Tax Credit that is refundable will expire in 2017. For example: you have one child under the age of 17 and a tax liability of $300. Currently, you would receive $1000 for your child that would offset your tax liability and the remainder in a refund of $700. Beginning in 2017, you will not enjoy the $700 refund.
2. Energy credits for improvements such as insulated hot water heaters, insulation, double-paned windows, etc. expire after 2013. You will no longer be able to take the energy credit for any improvements in these areas in 2014.
3. Tax-free charitable distributions directly from an IRA to a qualified nonprofit organization by persons age 70 ½ or older continues through 2013. The maximum you may contribute is $100,000. This is handy for seniors who have paid off their homes and no longer itemize deductions.
4. The Supreme Court decision that affects same sex legally married couples now allows same-sex couples to file their tax return as married filing joint rather than as two single individuals.
5. Education credits, specifically The American Opportunity Credit, will be allowed through 2017. However, the tuition deduction expires after 2013.
6. Unreimbursed medical expense deductions are subject to a 10% of AGI floor. This increased from previous years’ floor of 7.5% of AGI.
7. Home Office deductions will now be capped at $3 per square foot of your home office space up to a maximum of $1500 (or 300 square foot).
8. Standard mileage rates have increased from 55 cents per mile to 56.6 cents per mile.
9. The Earned Income Tax Credit, a refundable tax credit for low to moderate income workers, is set to expire in 2017.
10. The estate tax exemption for 2013 is set at $5,250,000 with a top tax rate of 40%. If your estate is valued at less than this amount, and you die by Dec. 31, no estate tax return needs to be filed and there will be no estate tax levied.