There are numerous tax law changes to occur beginning January 1, 2013 (assuming that Congress and the White House cannot agree to extend these tax provisions). While the items below are not all-inclusive, they are items that will affect many taxpayers and are all part of the falling off of the fiscal cliff scenario being discussed.
- Annual gift tax exclusion will increase from $13,000 to $14,000
- The amount used to reduce the net unearned income reported on a child’s tax return to calculate the Kiddie tax increases from $950 to $1,000
- The elective contribution limit for employees who participate in Sec. 401(k), 403(b) or 457(b) plans increases from $17,000 to $17,500. The catch-up provision limit for those age 50 and above remains at $5,500.
- The Social Security wage base increases from $110,000 to $113,700
- HSAs (Health Savings Accounts) contribution limits for individuals (self-only coverage) increases from $3,100 to $3,250. Family coverage increases from $6,250 to $6,450. The limit for catch-up contributions (for persons over age 55) remains unchanged at $1,000. The HDHP (high-deductible health plan) minimum deductibles are $1,250 for self-only coverage and $2,500 for family coverage. The out-of-pocket maximum for deductibles, co-payments and other amounts, but not premiums, is $6,250 for self-only coverage and $12,500 for family coverage.
- Do the Bush tax cuts expire and do the personal income tax rates increase? If so, in addition to the tax rate increases, the standard deduction and allowable itemized deductions will once again be determined (limited) by the taxpayer’s adjusted gross income (AGI)
- Refer to our earlier blog regarding the new 3.8 percent Medicare tax
- The reduced employee portion of FICA payroll taxes is scheduled to be eliminated
- The child tax credit will be reduced from a maximum of $1,000 to $500
- Dependent care creditable expenses will decrease from $3,000 to $2,400 (for one child) and from $6,000 to $4,800 (for two or more children), and the maximum credit will decrease from 35% to 30% of creditable expenses. The AGI-based reduction in the credit will begin at $10,000 rather than $15,000.
Be sure to read the Disclaimer page on this blog as this blog is for educational purposes only and should not be considered as the rendering of tax advice.