by Eric Nelsen
This is a pivotal year in terms of tax law changes, specifically for business owners and taxpayers at the higher income levels. The 2013 tax changes will undoubtedly result in an increase in overall tax liabilities for individuals in the upper income brackets. This is why it’s going to be even more important than ever to engage in tax planning this year. Doing so will help you eliminate painful surprises on your 2013 tax return.
Additional taxes in connection with portfolio income – There are new taxes in 2013 on investment, dividends and capital gains for people in the upper income levels. They are: An additional 0.9% Medicare tax on wages. If you file a joint return and your collective wages are above $250,000, your employers won’t withhold this for you and you will have to remit it with your tax return; There is a phase-out of itemized deductions and personal exemptions, and; Up to 23.8% tax on capital gains, dividends and other investment income
Penalties for Underpayment of Tax – Penalties for not paying in enough during the year will apply if your 2013 withholding and estimated tax payments do not equal at least 110% of your 2012 tax liability.
Business Provisions – Congress has extended various depreciation-related deductions until the end of 2013.
Businesses may elect to immediately expense under I.R.C. §179 up to $500,000 worth of new or used equipment purchased in 2013. This amount drops to $25,000 after 2013.
Additionally, businesses may immediately expense up to 50% (called Bonus Depreciation) of the cost of certain new assets purchased on or before December 31, 2013. This drops to $0 thereafter.
These expanded deductions are not fully adopted by Minnesota. Minnesota limits §179 deductions to $25,000, with 80% of the excess being deductible over the next five years. Minnesota allows only 20 percent of the Bonus Depreciation allowed, with 80 percent of the excess added back and recovered over the succeeding five years.
You may contact Eric Nelson at:
6500 City West Parkway #305
Eden Prairie, MN 55344