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DJ Spoltore, Jr
Certified Public Accountant

Investment and Tax News



The American Taxpayer Relief Act of 2012 includes sweeping changes in tax laws affecting returns filed for Tax Year 2013. Some of the major provisions of the Act are highlighted below.

New Top Tax Bracket The 10%, 15%, 25%, 28%, 33% and 35% tax brackets were made permanent. There is a new top tax bracket of 39.6% for incomes over $400,000 for single taxpayers, $425,000 for heads of households, $450,000 for married taxpayers filing jointly and $225,000 for married taxpayers filing separately.

Additional Medicare Taxes For 2013 tax returns, higher-income taxpayers may be subject to additional Medicare Taxes. The 0.9% Additional Medicare Tax is assessed on wages and net self-employment earnings exceeding certain dollar amounts ($250,000 if Married Filing Jointly; $125,000 if Married Filing Separately; $200,000 for all others). The 3.8% Net Investment Tax applies to taxpayers with net investment income if Modified Adjusted Gross Income exceeds certain threshold amounts ($250,000 if Married Filing Jointly or Qualifying Widow/Widower; $125,000 if Married Filing Separately; $200,000 if Single or Head of Household). If MAGI exceeds the threshold, the 3.8% tax applies to the lesser of the excess MAGI or the Net Investment Income.

Phaseout of Personal Exemptions and Itemized Deductions The American Taxpayer Relief Act of 2012 rolls back the phaseout of personal exemptions and itemized deductions which were part of the law prior to 2010. The $3,900 personal exemption amounts are reduced when Adjusted Gross Income exceeds certain threshold amounts ($300,000 Married Filing Jointly or Qualifying Widow/Widower; $275,000 for Head of Household; $250,000 for Single; and $150,000 for Married Filing Separately). These threshold amounts also apply in the Phaseout of Itemized Deductions (except for medical expenses, investment interest, casualty and theft losses and gambling losses). All other itemized deductions are reduced by 3% of AGI exceeding teh threshold amounts. The total reduction cannot exceed 80% of the deductions.

Deduction Floor for Medical Expenses Starting in 2013, only those medical expenses that exceed 10% of Adjusted Gross Income are deductible. This threshold is increased from 7.5% in prior years. The exception to this change is if the taxpayer is over 65 years of age (or either spouse on a joint return), in which case the lower 7.5% threshold still applies.

Simplified Home Office Deduction IRS has provided a safe harbor method for deducting home office expenses. Starting in 2013, taxpayers can deduct a flat $5 per square foot up to 300 square feet (a maximum deduction of $1,500).

IRS Mileage Allowance The IRS Standard business mileage rate for 2013 is 56.5 cents per mile. The rate for medical mileage and moving mileage is 24 cents per mile. For charitable mileage, the rate is 14 cents per mile.

Additional Information For more in depth discussion of these tax law changes and more information on changes affecting 2013 tax returns, visit www.irs.gov.


Standard Deductions
Married Filing Joint Return
Surviving Spouse
Head of Household
Married Filing Separate Return
Itemized Deductions
Married Filing Separate Return (Phaseout Starts)
Married Filing Jointly (AGI Phaseout Starts)
Casualty Loss (AGI Threshold)
Medical Deduction Under Age 65(AGI Threshold)
Miscellaneous (AGI Threshold)
Retirement Plans
SEP Nondiscrimination Compensation Amount
401(k) Maximum Compensation Amount
401(k) Maximum Exclusion (generally)
IRA Deduction Limit (generally)
SIMPLE Contribution Limit
Catch-Up Contributions (age 50 and over):
Traditional and ROTH IRAs
401(k), 403(b), and 457 Plans
Adjusted Net Capital Gains
General Rate
Low Rate(Taxpayers in 10% or 15% bracket)
High Rate (Collectibles)
Recaptured Gain on Real Estate

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