Last year was a year of intense debate with regard to personal income taxes, resulting in a number of legislative changes, as well as the extension of several tax provisions that were previously set to expire.
With the April 15 filing deadline for personal federal income tax returns just around the corner, The University of Alabama’s Shane Stinson provides a brief summary of federal tax updates that are likely to impact many 2013 tax returns.
These and other useful hints for the 2013 federal income tax filing season are available in IRS Publication 17 (http://www.irs.gov/publications/p17/index.html).
Married filing jointly and married filing separately status granted to same-sex marriages
- Same-sex spouses who were legally married in a state or foreign country that recognizes same-sex marriage must use the married filing jointly or married filing separately status on their 2013 federal income tax returns. This applies to same-sex couples who reside in a state or foreign country that does not recognize same-sex marriage.
- Amended returns for prior years may be filed within the applicable statute of limitations, generally the later of three years from the original filing date or two years from the payment of tax.
Medical expenses re-examined for tax year 2013
- The floor for deductible out-of-pocket medical expenses was raised from 7.5 percent to 10 percent of adjusted gross income. The floor remains at 7.5 percent for individuals age 65 and older.
- Pre-tax contributions to health flexible spending arrangements, or FSAs, are limited to $2,500 per year.
- High-income taxpayers may face additional Medicare taxes on excess compensation (0.9 percent, see Form 8959) and/or net investment income (3.8 percent, see Form 8960).
Several changes affecting high-income taxpayers
- A new top ordinary income tax bracket of 39.6 percent was added to the rate structure used in tax year 2012, accompanied by moderate inflation adjustments for lower income brackets.
- The maximum capital gain and dividend tax rates were increased from 15 percent to 20 percent for taxpayers in the top ordinary income brackets.
- Restrictions on personal exemptions and itemized deductions apply to taxpayers with adjusted gross income in excess of $150,000 (married filing separately), $250,000 (single), $275,000 (head of household) or $300,000 (married filing jointly).
Stinson is an assistant professor of accounting in UA’s Culverhouse School of Accountancy.
