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What's new with taxes?

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What's new with taxes? What's new with taxes?

Will you see a tax change this year? Probably; here are some significant changes:

Maine resident? 

The exemption amount has been increased to match the federal exemption amount.

A new form has been added to calculate the Property Fairness Credit, a refundable credit which replaces the Property Tax and Rent Rebate.

Recent (under)graduate?  

Living in Maine and paying on student loans? Be sure to check out the Maine Opportunity Credit, a credit for the student loans paid. These credits may be refundable if your degree is in science, technology, engineering or mathematics. I've written about this before, and you can expect to see more about this credit next month.

Self employed?  

Self employment taxes will be higher. The payroll tax holiday expired at the end of December 2012. Employees have been paying more in social security (FICA) tax all through 2013. Self employment income tax will be 2 percent higher than it was in 2012.

Also, there is a simplified option for a home office, deducting a set amount per square foot.

Affected by the Affordable Care Act's Individual Insurance Mandate? 

First thing to know: No one will be paying any fines as they file their 2013 taxes. Fines may be assessed on your 2014 income tax return filed next winter. But you should be looking at what health insurance meets the requirements, if you might receive an advance tax credit to help buy insurance, what fines could be assessed and if you are eligible for any exemption from purchasing insurance.  

Itemizing medical expenses?  

It may be harder to itemize medical expenses. If you are under age 65, medical expenses may be included on your itemized deductions only to the extent that they exceed 10 percent of your adjusted gross income; previously it was 7.5 percent. Ten percent is easier to calculate, but harder to meet.  Those over age 65 can keep the 7.5 percent reduction until 2017.

Same sex couple?  

Married same sex couples are authorized to file jointly in 2013. In addition, same sex couples married in prior years may optionally amend open year federal returns to file jointly.

Upper income taxpayer?  

Upper income taxpayers may see a variety of tax increases. These include:

Additional Medicare Tax:  A 0.9 percent increase applied to wages, compensation and self employment over $200,000 Single/$250,000 Married Filing Jointly (MFJ).  

Net Investment Income Tax:  A 3.8 percent tax which applies to Net Investment Income and may apply if your Modified Adjusted Gross Income is over $200,000 Single, $250,000 MFJ.  

The Pease Limitation on Itemized Deductions and Exemption limitations will again apply beginning at $250,000 Single, $300,000 MFJ.

The capital gains rate for those in the top tax bracket, 39.5 percent, has been raised from 15 to 20 percent. Capital gains rates for all other brackets remains the same. 

This is just a head's up; for more information, check with your tax preparer. I've addressed the Health Care Tax Credit, Simplified Home Office Deduction, and Property Fairness Tax Credit in more detail in recent articles.  

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