Bonnie Lee for Fox Business writes: Our country’s tax code is long and complex and is regularly getting
changed by lawmakers, making it hard to keep up with all the updates.
This year’s major tax law changes occurred early on with the
president signing into law the American Taxpayers Relief Act of 2012 on
Jan.2. The rest of the changes to the tax code this year were
enactments of new laws passed in prior years and from the Affordable
Care Act.
Here’s a look at the tax law changes that take effect this year, 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 and a tax liability of $300.
Currently, you would receive $300 to zero out your tax liability then a
refund of $700, the remainder. 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. If
you are considering improvements in these areas, be sure to install them
before year end. The items that qualify for this special tax treatment
will be marked by the manufacturer. Be sure to keep this documentation
in your tax file in the event of an audit.
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.
You cannot take a charitable deduction unless you itemize. To take
advantage of this tax benefit, the IRA manager makes the allocated
donation from the IRA distribution and only reports to the IRS the
amount of the distribution received by the recipient. For example, you
normally take $12,000 per year in IRA distributions--this amount would
be 100% taxable income. However, let’s say you decide you want to donate
$1,000 to charity. You ask your plan manager to make the donation from
your IRA account and supply you with the remainder, $11,000 for the
year. You will pay taxes on only $11,000. The donation will come off the
top.
4.The Supreme Court handed down a decision that affects same sex
legally married couples. The IRS now recognizes this marital status, so
same-sex couples can now 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. And the existing provisions for Coverdell
Education Savings Accounts are now permanent. However, the tuition
deduction expires after 2013.
6.The student loan interest deduction is now deemed permanent.
7. Employer-provided education assistance benefits are now permanent
8. The dependent care credit as it stands at its current levels and calculations are permanent.
9. The Earned Income Tax Credit, a refundable tax credit for low to
moderate income workers, is set to expire in 2017.However, I expect
that it will be renewed.
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.
Friday, November 29, 2013
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