Health Care Reform Changes Effective in 2013

A number of provisions in the 2010 health care reform legislation go into effect this year. Here are some of the changes that could affect you.

 

Medical expense itemized deduction. The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for taxpayers under age 65. Those 65 and older may continue to use the 7.5% threshold through the year 2016.

 

FSA contributions. The limit on contributions to health care flexible spending accounts (FSAs) is lowered to $2,500.

 

Medicare tax on earned income. A 0.9% Medicare surtax will be imposed on wages and self-employment income exceeding $200,000 for singles and $250,000 for married taxpayers filing a joint return.

 

New Medicare tax on unearned income. A new 3.8% Medicare tax will be imposed on unearned income (investment income such as interest, dividends, and capital gains) for single taxpayers with adjusted gross income exceeding $200,000 and for couples with adjusted gross income exceeding $250,000.

 

These changes may affect your 2013 withholding or quarterly estimated tax payments. Take the changes into account as you do your 2013 tax planning. For more information and planning assistance, contact our office.

 

 

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

IRS Simplifies Home-Office Deduction

IRS Simplifies Home-Office Deduction

 

The IRS is reducing the recordkeeping required for the home-office deduction, effective for 2013. Taxpayers who qualify may use a new optional deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.

 

Taxpayers opting for the simplified deduction cannot depreciate a portion of the home as they can under the other method. However, business expenses not related to the home, such as advertising, supplies, and employee wages are still fully deductible. This simplified option is available starting with the 2013 tax return which will be filed in 2014.

 

 

 

Extended provisions in the American Taxpayer Relief Act of 2012

 

The Act extended familiar itemized deductions, including state and local sales tax and the premiums you pay for mortgage insurance on your home.

 

Above-the-line deductions, such as the qualified tuition deduction for higher education expenses and the $250 deduction for unreimbursed expenses if you’re a teacher, are also available for both 2012 and 2013.

 

Another tax break that was renewed: the ability to contribute up to $100,000 from your traditional IRA to a qualified charity. As before, when you’re age 70½ or older, you can make a distribution directly from your IRA to the charity. The amount you donate is not included in gross income, and you can consider it part of your required minimum distribution for the year.

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.