What are the most significant tax changes this year?
The most significant tax changes focus on ordinary/ earned income, dividends, capital gains, AMT tax and various exemptions and deductions. See table below.
Table: Overview of tax changes | |||
Item | 2011 | 2012 | 2013 |
Alternative Minimum Tax exemption | $48,450 Single filers $74,450 Married filing jointly | $33,750 Single
$45,000 Married |
To be determined |
Tax rate ranges- ordinary income | 10%-35% | 10%-35% | 15%-39.6% |
Long-term capital gains tax rate (top rate) | 15% | 15% | 20% |
Qualified dividends tax rate (top rate) | 15% | 15% | 39.6% |
Payroll tax reduction of two percentage points | Yes | Final Year | Expired |
Surtax of 3.8% on investment income | No surtax | No surtax | Surtax applies to single taxpayers with modified AGI of more than $200,000; more than $250,000 for joint filers |
Increase in Medicare hospital insurance tax wage base for self-employed | N/A | N/A | 0.9% increase in employee portion of high income wage base of single filers with wages of more than $200,000; more than $250,000 for joint filers |
Phase-out of personal exemptions and itemized deductions for high income earners | N/A | Final year of suspended phase-out of personal exemptions and itemized deductions | Reinstatement of phase-out of personal exemptions and itemized deductions |
Marriage penalty equalization | Expanded deduction for married joint filers | Expanded deduction for married joint filers | Expanded deduction expires |
Child credit | $1,000 per child under age 17 | $1,000 per child under age 17 | $500 per child under age 17 |
Child care deduction | $3,000 limit | $3,000 limit | $2,400 limit |
Estate tax top rate | 35% | 35% | 55% |
Estate tax exemption | $5 million | $5.12 million | $1 million |