Many folks took advantage of the one-time opportunity in 2010 to convert funds from traditional IRAs to Roth IRAs and subsequently spread the tax over the following two years, 2011 and 2012. This was a very good option for some folks who wanted to do the conversion and reduce future tax costs. However (and there’s always a however in life!), with the coming of 2013, many of these same folks are experiencing an unexpected result of the conversions: a significant increase in Medicare Part B premiums. Beginning after 2003, Medicare Part B premiums have been partly determined by income – primarily higher income. For 2013, the increased Part B premium begins for single folks with incomes above $85,000, married couples above $170,000. The income used to calculate the Part B premium is always based on the most recent tax return, which in this case would be the 2011 tax return. […]
2013 tax year
IRS Sets 2013 Standard Mileage Rates
For several different categories of deductions, there are standard rates set by the IRS for mileage. The deductions are for business-oriented mileage, both for your own business and for miles driven on behalf of an employer (if deductible), as well as for medical purposes, deductible moving costs, and for charitable activities. These rates are set on a “per mile” basis. The IRS calculates the applicable costs associated with driving these miles on an annual basis, which includes the cost of fuel, maintenance, insurance, taxes, and the purchase price of the vehicle (or rather, depreciation). This allows for a much more simple method of deducting these costs rather than adding up all of the costs of a vehicle and then allocating an appropriate portion to the deductible use. You can choose between using the mileage rate or adding up all of the costs for your vehicle use, but once you’ve started […]
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Retirement Plan Contribution Limits for 2013
The IRS recently published the new contribution limits for various retirement plans for 2013. These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw across-the-board increases for most all contribution amounts, and as usual the income limits increased as well. This provides increased opportunity for savings via these tax-preferred vehicles. IRAs The annual contribution limit for IRAs (both traditional and Roth) increased from $5,000 in 2012 to $5,500 in 2013. The “catch up” amount, for folks age 50 or over, remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $59,000 for a full deduction; phased deduction is allowed up to an AGI of $69,000. This is an increase of […]
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2013 COLA for Social Security is Set
The increase to Social Security retirement benefits for calendar year 2013 has been announced at 1.7%. Much ballyhoo has been made about the fact that this is one of the smallest increases in history, following the 3.6% increase at the beginning of 2012. This is actually an increase of more than the average that was received with the most recent increase, since there was no increase at all between from the beginning of 2009 until the beginning of 2012. So the average increase over the past three years was 1.2%. Inflation has been extremely low over period, so this small increase is not unexpected. Medicare premiums are also expected to increase, which likely will wipe out approximately half of the Cost-of-Living Adjustment.
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Annual Gift Tax Exclusion Increases in 2013
All individuals have the opportunity to give gifts annually to any person without having to file a gift tax return. For 2012, the amount of the annual exclusion is $13,000. This means that anyone can give a gift of up to $13,000 to any person for any reason without worrying about possible gift tax implications. A married couple can double this amount to $26,000. In 2013, this annual exclusion amount will increase to $14,000 ($28,000 for couples). For amounts given in excess of the annual exclusion amount, every individual has a lifetime exclusion amount, against which the excess gifts are credited. For 2012, the lifetime exclusion amount is $5,120,000. This lifetime exclusion amount is one of the tax law provisions that is set to expire at the end of 2012, along with the other “Bush Tax Laws”. If allowed to expire, the lifetime gift tax exclusion amount will revert to […]
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A Few Upcoming Tax Changes to Keep in Mind
As 2013 draws ever nearer, we need to keep a few potential tax changes in mind. These items are subject to change – they’ve changed in the past at the last minute, so there’s no reason to believe they won’t change again – but if they don’t we should be planning ahead. Flex-Spending Health Accounts If your employer provides you with a Flex-Spending Account for healthcare expenses, there will be some changes coming up in 2013. This is the kind of account where you set aside a sum of money each payday, pre-tax, that can be used throughout the year on deductibles, non-covered medical expenses, and co-pays. Beginning in 2013, these plans will be limited to a total of $2,500 per year in salary deferral. This comes about as a part of the Obama-care legislation. Currently there is no cap on contributions to these plans, although some employers place a […]
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Health Savings Account Limits for 2013 Published
The IRS recently distributed information about the adjustments to Health Savings Accounts (HSAs) for 2013. These limits adjust annually based upon inflation calculations (if inflation is present). For 2013, the annual contribution limit for self-only coverage is $3,250, which is an increase of $150 over the figure for 2012. For an individual with family coverage, the limit in 2013 is increased by $200 to $6,450. The deductibles for HSA accounts are also increased in 2013: $1,250 for self-only coverage, and $2,500 for family coverage. This is an increase of $50 and $100 for each deductible, respectively. Lastly, the out-of-pocket expense limit for self-only coverage is $6,250 in 2013, an increase of $200. Family coverage out-of-pocket maximum is $12,500 (up from $12,100 in 2012). This limit is for deductibles, co-payments, and other amounts, but not premiums.
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2013 Social Security Wage Base Projected
jb update 10/16/2012: The wage base for 2013 was confirmed at $113,700. The Social Security Administration trustees recently projected the wage base for 2013. This is the maximum amount of wage income that an individual earns for the year that is subject to Social Security withholding tax. For 2013, this amount is projected at $113,700. The new amount is $3,600 more than the 2012 wage base, which is set at $110,100, for an increase of 3.27%. Keep in mind that this is only the increase in the taxed wage base, and there is little correlation between this and any potential increase in benefits for the year. Future years’ estimated wage bases are projected as follows: 2014: $117,900 2015: $123,000 2016: $128,400 These are only projections, each year in October the SSA trustees will set the amount for the coming year.
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