new tax landscape looks very different than it did in 2012. How will
the tax law changes affect your situation? Here is a brief summary
covering some of what you can expect.
IRA charitable rollover:
Donors aged 70½ or older are once again eligible to move up to $100,000
from their IRAs directly to qualified charities without having to pay
income taxes on the money. Known as the IRA charitable rollover, this
law has been extended to the end of 2013 and made retroactive for 2012.
Your gift will qualify under this law if:
Individual taxpayers earning more than $400,000 a year and married
couples earning more than $450,000 will see a tax rate increase. The top
income tax rate has been raised to 39.6 percent in 2013. The 2013
ordinary income tax rates are now 10 percent, 15 percent, 25 percent, 28
percent, 33 percent, 35 percent and 39.6 percent.
Estate, gift and generation-skipping taxes:
The 2013 tax law permanently preserves the current individual gift,
estate and generation-skipping tax to a unified $5 million exemption.
This amount is indexed for inflation each year, with the exemption for
2013 being $5.25 million. The top estate and gift tax rates will rise
from 35 percent to 40 percent. The annual gift tax exclusion—the amount
you can give to anyone gift tax-free each year—is now $14,000 ($28,000
for married couples).
2012, if one spouse died without using up his or her federal estate tax
exemption, the unused portion could be transferred to the surviving
spouse. This was called a portability provision. In 2013, this
portability provision was made permanent. This year's combined exemption
for married couples is $10.5 million.
In 2013, the Pease limitation was revived, meaning that itemized
deductions, including charitable deductions, are reduced for individuals
earning $250,000 or more and for married couples earning $300,000 or
more. These amounts will be indexed annually for inflation. The Pease
limitation does not apply to deductions for medical expenses, investment
interest, casualty and theft losses, and gambling losses.
In 2013, personal exemptions are limited for individuals making
$250,000 or more and for married couples making $300,000 or more.
Qualified dividend income will be taxed at a maximum rate of 20
percent. See below for how this percentage may be affected by the
Long-term capital gains:
The capital gains tax rate – the tax you pay on the amount an asset has
increased in value over time – will depend on a taxpayer’s ordinary
income tax rate. The capital gains tax will be waived for taxpayers
below the 25 percent ordinary income tax rate. For those taxpayers who
fall at or above the 25 percent income tax rate but below the 39.6
percent tax rate, the capital gains tax will be 15 percent. For those at
the 39.6 percent ordinary income tax rate, the capital gains tax will
be 20 percent. See below for how the Medicare surtax may affect these
Beginning in 2013, there is a 3.8 percent surtax on investment-type
income and gains. This applies to investment income for individuals with
adjusted gross incomes above $200,000 ($250,000 for those filing
jointly). This means the top rate for capital gains and dividends will
be 23.8 percent if your income falls in the 39.6 percent tax bracket.
In 2013, the Social Security payroll tax will increase from 4.2 percent
to 6.2 percent, meaning taxpayers will have more withheld from each
Consult Your Tax Advisor Today
Because of the numerous changes to tax laws in 2013, everyone can expect
to be affected. Consult your tax advisor on what the new tax laws will
do to your bottom line and how to plan accordingly.
If you are contemplating a charitable gift under the new laws, please feel free to contact Tim Enstice at 757-962-8213 or Legacy@peta.org with any questions you may have.
Browse additional information we have available here and let us know if we can help.
Copyright © The Stelter Company, All rights reserved.
The information on this website is not intended as legal or tax advice. For legal
or tax advice, please consult an attorney. Figures cited in examples are for
hypothetical purposes only and are subject to change. References to estate and
income taxes apply to federal taxes only. State income/estate taxes or state
law may impact your results.
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