Tax Law Changes for 2013

Due to the federal government shutdown in October the IRS has delayed the opening of the tax season to January 31st.

What’s New

The IRS will begin accepting 2013 tax returns on January 31.  There are some important tax changes for higher income taxpayers in 2014.  Taxpayers that make over $400,000 (or $425,000 if you’re married and filing jointly) will be subject to a 39.6 percent tax rate in 2014.  It’s the highest tax rate in almost 15 years.

Also, taxpayers that make over $200,000 (or $250,000 for married taxpayers) will be subject to the medicare surtax.  This is an additional .9 percent surtax on earnings over the threshold on top of regular medicare taxes which everyone pays.  There is also a net investment income tax if you have both net investment income and modified AGI of at least $200,000 ($250,000 for married taxpayers).

There is also a tax implication related to the Affordable Care Act.  If you choose not to have health insurance in 2014, and don’t meet other exemptions, you’re going to have to pay a penalty.  In 2014 that penalty is $95 per uninsured adult and $47.50 per child up to $285.  The penalty is due when you file your 2014 tax return.  This flat fee will rise to $325 in 2015 and $695 in 2016.

When it comes to tax breaks, there are 55 tax breaks that expired at the end of 2013.  Assuming no action is taken by Congress, that means changes for tax filers in 2014.  Two popular above the line deductions that will go away are applicable to teachers and for qualified tuition and related expenses.  The $250 out of pocket deduction available for teachers will no longer be available for 2014.  Also, the tuition and fee deduction of up to $4,000 of qualified tuition and related expenses has now expired as well.

For more information, read on more below from the IRS website.


This section summarizes important tax changes that took effect in 2013. Most of these changes are discussed in more detail throughout this publication.

Future developments. For the latest information about the tax law topics covered in this publication, including information about any tax legislation, go to

Change in tax rates. The highest tax rate is 39.6%. For more information, see the 2013 Tax Computation Worksheet or the 2013 Tax Rate Schedules.

Tax rate on net capital gain and qualified dividends. The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. See chapter 16.

Medical and dental expenses. You can deduct only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (7.5% if either you or your spouse is age 65 or older). See chapter 21.

Personal exemption amount increased for certain taxpayers. Your personal exemption is increased to $3,900. But the amount is reduced if your adjusted gross income is more than:

  • $150,000 if married filing separately,
  • $250,000 if single,
  • $275,000 if head of household, or
  • $300,000 if any other filing status.

Limit on itemized deductions. You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than:

  • $150,000 if married filing separately,
  • $250,000 if single,
  • $275,000 if head of household, or
  • $300,000 if any other filing status.

Same-sex marriages. If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. See chapter 2. If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. For details on filing amended returns, see chapter 1.

Health flexible spending arrangements (FSAs). You cannot have more than $2,500 in salary reduction contributions made to a health FSA for plan years beginning after 2012.

Expiring credits. The plug-in electric vehicle credit and the refundable part of the credit for prior year minimum tax have expired. You cannot claim either one on your 2013 return. See chapter 37.

Ponzi-type investment schemes. There are new rules for how to claim a theft loss deduction on Form 4684 due to a Ponzi-type investment scheme. See chapter 25.

Home office deduction simplified method. If you can take a home office deduction, you may be able to use a simplified method to figure it. See Publication 587, page 29.

Standard mileage rates. The 2013 rate for business use of your car is increased to 56½ cents a mile. See chapter 26.The 2013 rate for use of your car to get medical care is increased to 24 cents a mile. See chapter 21.The 2013 rate for use of your car to move is increased to 24 cents a mile. See Publication 521, Moving Expenses.

Source: Publication 17 (2013), Your Federal Income Tax

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