2013 Tax Changes
In our attempt to make some sense of the craziness going on in Washington, D.C., here are some tax issues that have been decided:
- The Payroll Tax Holiday is over. This means anyone who receives a salary or has self-employed income will see their taxes increase by 2%. Two years ago Congress reduced the employee’s portion of Social Security taxes from 6.2% to 4.2%. This was an attempt to stimulate the economy; however, it was done at the expense of funding the future needs of Social Security. As you know, after 2 years it is hard to give it up, but it is over. I have been a CPA since 1996 and 2011-12 have been the only 2 years that employee’s portion was not 6.2%. If you are self-employed you have always been paying both sides of the Social Security taxes. So, in 2011-12 you only paid 10.4%, but now you will be paying 12.4% once again.
- For business owners who have utilized the accelerated depreciation expense referred to as “Section 179 Expense” in the past, you will be relieved to know this tax provision will continue for 2013 and beyond. Also, “Bonus Depreciation” has been preserved as well. Here are some details:
2013 Deduction Limit = $139,000
Section 179 Deduction limit after adjustment for inflation has increased to $139,000 (maximum allowance would have been only $25,000 prior to the new legislation).
2013 Limit on Capital Purchases = $560,000
Section 179 Threshold for total of equipment & software that can be purchased has increased to $560,000 (threshold would have been only $200,000 prior to the new legislation).
2013 Bonus Depreciation = 50%
The new law allows 50% “Bonus Depreciation” on qualified assets placed in service during 2013.
- For those of you that make more than $400,000 ($450,000 filing jointly) in taxable income, you will be hitting a new top tax bracket of 39.6%. This does not mean that every taxable dollar will be hit at this percentage, but each new dollar earned over these thresholds will be taxed at this new rate.
- The dividend and capital gain rate will remain at 15% except for those taxpayers that are mentioned in item No. 3 above. For those taxpayers, the new rate will be 20%.
Vann Dixon, CPA, P.C.
1028 Radio Road
Durant, OK 74701
Phone: (580) 931-9994
Fax: (580) 931-9750