Joint Committee on Taxation Issues Overview of Federal Tax System for 2013

• The Joint Committee on Taxation (JCT) has provided a summary of the federal tax law as in effect for 2013. As part of its analysis, the JCT projected various inflation adjustments for 2013.  The personal exemption is $3,900. The personal exemption phaseout begins when AGI exceeds $250,000 (single), $275,000 (head-of-household), $300,000 (married filing jointly) and $150,000 (married filing separately). Personal exemptions completely phase out at $372,501 (single), $397,501 (head-of-household), $422,501 (married filing jointly) and $211,251 (married filing separately)
• The standard deduction is $6,100 (single, married filing separately), $8,950 (head-of-households), and $12,200 (married filing jointly, surviving spouses).
• The Pease limitation on itemized deductions begins at AGI in excess of $250,000 (single), $275,000 (head-of-household), $300,000 (married filing jointly) and $150,000 (married filing separately).
• The AMT exemption amounts are: $51,900 (single, head-of-household), $40,375 (married filing separately), and $80,750 (married filing jointly, surviving spouses). $23,100 (estates, trusts). The exemption amounts phase out when AMTI exceeds $153,900 (married filing jointly, surviving spouses), $115,400 (single, head-of-household), $76,950 (married filing separately, estates and trusts).
• The maximum tax rate on an individual’s adjusted net capital gain is 20 percent on any amount of gain that otherwise would be taxed at a 39.6 rate. In addition, any adjusted net capital gain otherwise taxed at a 10- or 15-percent rate is taxed at a zero-percent rate. Adjusted net capital gain otherwise taxed at rates greater than 15-percent but less than 39.6 percent is taxed at a 15 percent rate. These rates apply for purposes of both the regular tax and the alternative minimum tax and dividends are generally taxed at the same rate as capital gains.
• The child tax credit is $1,000 per child. The phaseout for individuals begins at $75,000 (singles and head-of-household), $110,000 (married filing jointly), and $55,000 (married filing separately). To the extent the child credit exceeds the taxpayer’s tax liability, the taxpayer is eligible for a refundable credit. The additional child tax credit is equal to 15 percent of earned income in excess of $3,000.
• In 2013, the maximum EITC is $6,044 for taxpayers with more than two qualifying children, $5,372 for taxpayers with two qualifying children, $3,250 for taxpayers with one qualifying child, and $487 for taxpayers with no qualifying children. The credit amount begins to phase out at an income level of $17,530 ($7,970 for taxpayers with no qualifying children). The phaseout percentages are 15.98 for taxpayers with one qualifying child, 17.68 for two or more qualifying children, and 7.65 for no qualifying children.
• The net investment income tax is 3.8 percent of the lesser of net investment income or the excess of modified adjusted gross income over $250,000 (married filing jointly, surviving spouses), $125,000 (married filing separately) and $200,000 (single, head-of-household).
• The employee’s share of Social Security tax is equal to 6.2 percent of covered wages up to the wage base of $113,700 and the Medicare tax is 1.45 percent of covered wages. There is no wage cap for Medicare tax. However, for 2013, the employee portion of the Medicare tax is increased by an additional tax of 0.9 percent on wages in excess of $250,000 (married filing jointly), $125,000 (married filing separately), and $200,000 (single, head of household or surviving spouse). Moreover, unlike the general 1.45 percent Medicare tax on wages, in the case of a joint return this additional tax is on the combined wages of the employee and the employee’s spouse. This additional tax also applies to self-employed individuals.