If you typically file your taxes early to receive your refund faster, you’ll have to wait a bit longer this tax season. Due to the partial government shutdown last year, the IRS won’t begin processing 2013 returns until January 31, 2014. (The April 15 deadline, however, remains the same.) That said, let’s review some important items to be aware of as you prepare to file your 2013 taxes, as well as look ahead to potential changes for 2014.
Filing your 2013 return
Americans—especially high-income taxpayers—are set to face a host of changes this tax season, both pleasant and not-so-pleasant. Highlights include:
- New top tax rate. Individual filers who earn more than $400,000 ($450,000 for married couples filing jointly) will fall into a new 39.6-percent bracket, which replaces the previous 35-percent rate.
- Higher Medicare taxes. An additional Medicare surtax of 0.9 percent applies to income over $200,000 ($250,000 for married couples filing jointly). There’s also a new 3.8-percent tax on net investment income for taxpayers with modified adjusted gross income above that same threshold. (The IRS explains what does and doesn’t count as net investment income at www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs.)
- Limitation on itemized deductions. Reintroduced in 2013 by the fiscal cliff deal, the limitation affects taxpayers with adjusted gross income (AGI) above $250,000 ($300,000 for married couples filing jointly). For these taxpayers, itemized deductions will be reduced by 3 percent of the AGI amount above the threshold. The same income threshold also applies to phaseouts for personal and dependent deductions.
- Simplified home office deduction. Instead of calculating actual expenses for a home office, you can take a standard deduction of $5 per square foot of home office space, up to 300 square feet—for a maximum of $1,500. The IRS estimates that the new option will save taxpayers 1.6 million hours of paperwork and recordkeeping annually.
- New filing options for married same-sex couples. Legally married same-sex couples must file their federal returns as married, regardless of whether their current state of residence recognizes same-sex marriage. Keep in mind that some couples may need to file their state tax returns singly if the state where they live doesn’t recognize the marriage.