Tax tips for Married Filing Joint Taxpayers in 2013
Funny. You’d think one would remember being shoved off a cliff. Whether this cliff be a fiscal or a literal one. Apparently, after years of deliberation from congress, three hours before the midnight deadline of January 1st, the House approved a deal. Technically, the establishment rode us right “over the cliff, “ considering the details of the deal were not finalized until after the deadline of the new year. The freshly minted portions of the tax code will of course be retroactively applied to the first minute and day of 2013. Now let’s get to the important part. How does this affect your client? What advice can you give to your client to show them you are voraciously researching the aspects of this deal and using that knowledge to lower their soon to be gargantuate tax bill.
For the tax year of 2013, the tax code will go through more changes than a weightlifter’s mood on steroids. One of the groups of taxpayers that will be hit the hardest by the new provisions of the agreement is those households that file MFJ while reporting two high incomes. Lets dive into the aspects and effects of this deal on those filing jointly and making pretty good scratch.
Tax Brackets for Single Filers
There must be a developing conspiracy directed at those who choose to tie the knot and walk the line of morality and decency. Being single has never been so in vogue. New for 2013, those taxpayers who report themselves as single to the IRS and have an income exceeding the designated threshold of $200,000 will be subjected to a rapid acceleration of their federal tax rates on wages and investments. These increases will weigh heavily on married couples more than single filers, and this is increasingly true if both of the spouses are employed and report capital gains as well as dividend income.
The provision in the new law allows for multiple thresholds to kick in for married filers at a mere $50,000 past where it is implemented for the single filer. The married filers reporting income of at least $300,000 will also be subject to the returning phase outs of the value of deductions and exemptions that were reinstituted for 2013.
Tax Brackets Change in 2013
Here are the specifics. There are three of these aforementioned thresholds that are now effecting taxpayers currently. Taxable income in excess of $450,000 a year for MFJ and $400,000 for single filers is the point at which the new(but old) income tax bracket will rear its brutal mug at the bloated rate of 39.6%, from 35%. One more surprise. At these levels of taxable income your client will be subject to the new 20% rate applicable to capital gains and dividends, where as the bracket used to stand at 15% throughout the previous decade.
The second threshold begins at the AGI point of $250,000 for married couples, while it sits at $200,000 for single filers. That is not much of a gap if you ask me. These are the bowies that mark the beginnning of the end for your clients investment vessels. An extra 3.8% surtax is levied on investment income from these points as well as an additional 0.9% on your clients wages.
And then there are the phaseouts placed on the value of deductions and personal exemptions which are $300,000 on those filing jointly and $250,000 for those filing lonely. At those Adjusted Gross Income levels your client’s itemized deductions and personal exemptions will matter less and less until they matter not at all. These provisions were enacted as a compartment that helped finance the enormous expansion of medical coverage policies that were championed by the king himself, Obama.
Helping My Client Avoid Paying Higher Taxes
Here’s the bottom line. As I have I am sure irritatingly stated one too many times already, you will not progress as a tax preparer if you don’t make an effort to understand the current and future ramifications of the constant changes in the tax code. And the year 2013 is not the year you wanna decide to take a long vacation from wisdom and think you know everything there is to know about taxes. With the knowledge of the new provisions of the tax code, you are able to offer a classier, higher grade, more accountant style servicing to your client. This means you can offer them advice that conforms to their specific life situations while corresponding to the governments tactics. Oh, and one more thing, last time I checked ACCOUNTANTS bill just a tad more than the little baby tax preparer.