Quick Recap of 2013 Tax Changes

Several key tax provisions took effect on January 1, 2013, as part of the American Taxpayer Relief Act of 2012:

Tax Rate Increases

  • Top long term capital gains and qualifying dividends tax rate increased from 15% to 20% – or 23.8% if you include the new 3.8% Medicare tax on investment income (this is a 59% increase).
  • The estate and gift tax exclusion was retained at $5+ million (indexed for inflation), but the top estate and gift tax rate was increased from 35% to 40%.

New Medicare Surtax 

  • Earned income (wages & self-employed income) in excess of $200,000 (for single people) and $250,000 (for married couple) will be subject to 0.9% Medicare tax.
  • Investment income of taxpayers whose Adjusted Gross Income is over $250,000 (for joint filers) will be subject to the new 3.8% Medicare surtax.
  • Taxable gains on residences (gains over $250,000 for individuals and $500,000 for joint filers) will also be subject to 3.8% Medicare surtax.
  • Employer’s part of the Medicare tax remains unchanged.

Other

  • The Section 179 expense deduction for 2013 is $500,000 and additional 50%  first-year bonus depreciation.  These deductions, however, are scheduled to be greatly reduced in 2014.
  • The gift tax exclusion per person increased to $14,000.

For more information, see KPMG’s website here or contact Leiza Dolghih.

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