Anyone with an internet connection or television knows that fiscal year 2013 is going to be far different than the previous one. And much like the entire country, Houston and the surrounding areas are included, as federal tax policies and rates are about to change. If you don’t feel like waiting for your accountant or bookkeeper to return your call and explain the situation, do some researching. To help you out, below are some of the most important changes soon to come up during your next tax return.
- Social Security Tax
Ever hear pundits say how Social Security is going bankrupt? It seems to be true, because the rates are rising. For the year 2013, social security tax will rise from 4.2 percent to 6.2 percent, meaning a two percent drop in the total for your next
paycheck. For those of you making 50k a year, your total take home pay will be $1,000 less per year, or $83.33 less per month. This particular tax increase applies to everyone taking home a check regardless of income, bringing into question the Obama promise that only those who make over 250k a year would get a tax increase. - Medical Expense Deductions
Those of you who qualify for medical and dental deductions may experience some difficulties with these new rules. These types of deductions were allowed if they totaled 7.5 percent or more of the adjusted gross income. However, for this year that number will rise to 10 percent regardless of income. Only those 65 and older will still be able to claim the old rates. So if you made 50k per year and spent 7.5 percent of your income on medical expenses, that deduction is no longer allowed, and you will pay taxes on that $3,750 which comes to $937.50. - Dependent Credits and Child Credits
If you pay someone to care for your child so you could work, you qualify for this credit. However, the maximum allowable for this credit will drop from $3,000 to $2,400 for the coming year, burdening working parents with an additional $600 in taxes regardless of income. - Student Loans
Those who have student loans should know that the interest on those loans is tax deductible. However, the tax year for 2013 may see their rates change. According to About.com, the deduction will revert to older standards where student loan interest can only be deducted during the first 60 months of repayment. - 200k Income
And if you make the much criticized 200k in income or more or 250k or more if married, you will see an immediate increase in your Medicare Tax. Those who make 250k or more as individuals or 300k or more as married couples will also see a reduction or elimination of the tax deductions for dependents, mortgage interest, property taxes, state income, and charitable deductions.
It is also worth mentioning that we are not aware of any tax rate reductions for the coming year. If you have questions on how to best prepare for these new changes in the tax law, contact your accountant. As always, if you have any questions for a Houston bookkeeper and tax professional, please give us a call.