File Taxes – Tax Changes This Year & What To Prepare For
Income taxes seem to be as volatile as the housing market, from the looks at what’s up ahead for taxpayers come the end of the fiscal year 2013. Several changes that have been on the verge of implementation will now be in full bloom. Some of it will come in the form of good news: for example, the many tax benefits that are linked to ObamaCare. And this year you can file taxes on January 31. Other changes may not be that welcome from the perspective of a Stone Mountain GA or Decatur GA taxpayer, to whom this article is primarily addressed.
Give Me the Bad News First
While good and bad are certainly relative terms, when it comes to taxation, anything that takes more money out of someone’s pocket can justifiably be considered “bad.” There are several such new implementations in the domain of income taxes coming up at the end of the 2012-2013 financial year. To be aware of these is to be prepared, so here is a glimpse at some of the key changes that you can expect to see when the taxman comes calling:
- If your Modified Adjustable Gross Income is greater than $250,000 (couples) or $250,000 (individuals) during this year, you can expect to pay a bigger amount in Medicare payroll taxes as well as surtaxes for Medicare on any income received through investments.
- Exemptions (personal) and other deductions (itemized) will be reduced this year for those with Adjusted Gross Incomes of over $300,000 (couples jointly filing) and $250,000 (individual); what this means to couples earning more than $300,000 and filing jointly is that they will have a reduction of 2% or more in what can be exempt, depending on how much more they earn.
- For couples with AGI over $450,000 and individuals with income over $400,000, there will be a tax rate of 39.6% (top marginal) applicable. In addition, capital gains (long-term rates) and qualified dividend rates may also show increases.
In a nutshell: when you file taxes, your payroll income taxes will likely hit the below $200,000 category of taxpayers; for those above that bracket, depending on the specific bracket they fall into, several increases are likely to be seen. This makes it imperative to begin tax planning right now and make sure you decrease your tax liability to the maximum extent possible. Tax is a confusing subject because everything changes at the drop of a Congressional hat. Some changes are 2012 carry-overs, but we are still calling them “changes” because they have yet to be made “permanent” in the real sense of the word.
What to Do Right Now
For starters, consider that the rate of 39.6% instead of 35% is now “permanent” as of this year. Therefore, planning now is a good idea, according to expert financial planners. Here are some of the ways in which you can take advantage of the changes and 2012 carry-overs:
- Consider joint filing if you are married, because it will give you an income threshold that is twice the 15% applicable rate as individuals.
- With same sex marriages being recognized by the federal government, this, too, can be an opportunity to save on taxes. They are now on the same footing as regular married couples and can, therefore, take advantage of the same benefits with respect to income taxes.
- Capital gains taxes can be offset using capital losses. The logic behind this approach is that you want an apples to apples offset. So, if you have stock that isn’t performing well, you can sell it for a loss to have your adjusted income – and capital gains that are taxable – reduced.
- Municipal bonds are coming to the forefront this year as a preferred asset allocation vehicle. They are tax-efficient, as are growth stocks and ETFs from equity indices.
- Peaking on tax-friendly investments such as 457 plans and 401(k)s is a good way of reducing your tax liability this year as well. Any contribution that qualifies go towards bringing your AGI down; doing this could mean a change of bracket to a lower one, which may bring on additional tax benefits.
- For retirees approaching their threshold for taxation, it is recommended that they use a blend of tax-free and taxable withdrawals to ensure that their taxable income is maintained at an ideal level at all times.
- Delaying Social Security is also being touted as a way for those who can afford it to control their tax level and potentially gain more when the benefits come in later.
So What’s the Good News?
Finally, now for the good stuff! When you file taxes this year just know Income taxes aren’t all bad, as you will see from the points below. Most of them are a result of inflation adjustments, and were announced by the IRS in October 2013:
- There is an increase in the 39.6% tax bracket of $7,600 for joint-filing couples and $6,750 for singles.
- Standard deductions are double for couples filing jointly as they are for singles ($12,400 and $6,200, respectively)
- Thresholds for itemized deductions have gone up by $5,050 for joint-filing couples and $4,200 for singles in the over $300,000 and over $250,000 brackets.
- AMT exemption amounts are up by $1,300 and $900 for joint-filing and singles, respectively.
The IRS website outlines the exact extent of impact of inflationary adjustments on various tax types and brackets for individuals, couples, business owners and self-employed individuals from all categories. The bottom line is that there are certainly some tax benefits to be gained by a significant portion of the population. ObamaCare notwithstanding, there are several breaks that are being handed out this year.
Taxation can be a confusing subject even for tax attorneys because of the constantly fluid nature of income taxes and other forms of tax. To get a clear picture, consult a lawyer; to find out how to minimize your liability, consult a tax planner or a financial planner. Be sure that whomever you talk to or decide to work with is qualified to give out advice on taxation. Never forget that you are the person responsible for everything that you tell the government – nobody else. Therefore, it is in your best interest to verify all claims rather than accepting anything at face value.
Get Extra Money This Tax Season
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Maximum Refund Taxes
For those wanting more information on Income Tax Scams and Fraud feel free to join us every Wednesday and Thursday at 7pm and Saturday at 12:30pm at 5060 Memorial Drive Suite A, Stone Mountain GA 30083. We offer FREE Tax Class and Seminars relating to Tax Scams & Fraud, the Affordable Health Care Act, and How To Get The Most Money Back In Your Tax Refund. Call Us Now 678-885-9197
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The author writes several engaging and informative pieces that are crafted to help people understand taxes and their implications. Taxation is a vast subject, and the author researches extensively to provide the most up-to-date information possible on income taxes for people from Decatur GA. Find out how you can get a free car when you file your tax returns this year. Give us a call on 678-885-9197 or visit Maximum Refund Taxes to know more about Taxes Filing Stone Mountain Decatur GA.
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