Tax Information You Need to Know!
TAX INFORMATION YOU NEED TO KNOW – Automatic Adjustments Effective January 1, 2013 (Source: IRS Bulletin RP-2021-41 dtd October 18, 2012.)
The news media are chocked full of information – mostly political – about what will happen on January 1. Try to ignore that for a moment and instead focus on what is scheduled to change just because it’s 2013. Here is a summary list of what will change with a few comments. These are by no means all of them. If you’d like to know the particulars, feel free to contact me.
- 1.“Kiddie Tax,” the amount used to reduce tax on unearned income for minors will adjust. This is important where your children have been given investments with income so that the taxes will be lower.
- 2.Income from US Savings Bonds used to pay for qualified education expenses is subject to a phase-out based on income.
- 3.The amount of annual premium deductible for long-term care insurance changes as do the tests to comply with high deductible requirements in Medical Savings Accounts.
- 4.The annual exclusion for gifts increases. This is important because people often violate gift tax rules unintentionally; for example, buying someone other than your spouse a car. The State of Tennessee’s rules are harsher than the IRS and if you are caught violating them, there are stiff fines.
- 5.There is a tax on the sale of any shaft used in the production of certain types of arrows. I doubt very many people care about this. It just gives me a chance to set up a joke about getting the shaft.
- 6.The maximum hourly rate for legal services where the attorney’s fees were awarded by the court is adjusted.
- 7.The income and contribution limits for all retirement plans adjust. Instead of automatically continuing what you’re doing, ask your investment advisor what else is available. Make sure you consider non-qualified plans as well as the traditional 401(k) and IRA-based programs.
Along these same lines but not included in the list of automatic adjustments are the potential changes to the health care insurance landscape coming online in 2013 and 2014. Don’t get caught waiting until the last minute. Meet with your insurance advisor now and look down the road together. You may be paying too much for personal and/or employer-based coverage and can start saving already. Make sure you understand what expenditures are deductible. People are missing a lot of deductions by assuming they understand the law.