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New 2013 Tax Rates and Standard Deductions

Standard deductions go up, but the ceiling for itemized deductions go down in 2013—plus other changes that will affect your taxes this year.

The Internal Revenue Service has announced annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012. 

The tax items for 2013 of greatest interest to most taxpayers include the following changes.

  • Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.
  • The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.
  • The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
  • The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have three or more qualifying children, up from a total of $5,891 for tax year 2012.
  • Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.
  • For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

Details on these inflation adjustments and others are contained in Revenue Procedure 2013-15, which was published in Internal Revenue Bulletin 2013-5 on Jan. 28, 2013. Other inflation adjusted items were published in October 2012 in Revenue Procedure 2012-41.

—News release from the Internal Revenue Service

Jesse M. January 20, 2013 at 05:17 PM
That's not fair! You have to use the center square on the first play.
Andrew Peceimer January 20, 2013 at 06:27 PM
Too bad we did not elect Romeny and we could have gotten rid of a majority of the phony/non necessary exemptions. Now we have more crony Capitalism. Got to love Google and GE (Obama Buddies) for not having to pay taxes with their offshore billions.
Mark Paxson January 20, 2013 at 07:09 PM
This is just too funny ... you realize Romney had money off-shore, right? You also realize that Romney never actually told anybody what exemptions he would propose to get rid of? Note the key word there ... "propose." He would have no independent authority to do anything with the tax code.
Cathy P. January 20, 2013 at 07:22 PM
@Mark: too funny is right, how quickly they forget!
Pam Pinkston January 20, 2013 at 08:04 PM
@Cathy and Mark---How quickly YOU forget. YOUR Dem party is looking at excluding or limiting the mortgage deduction so they can get their hands on more of your money. This does hit the middle-class, right? Them being the ones who usually own homes, right? But, of course, that's not as bad as Romney's "undisclosed" proposals, right? Source: See p.32, Figure 7 of the 2010 Report, President's Commission on Fiscal Responsibility, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
Russ s January 20, 2013 at 08:18 PM
It's too nice of a day to argue about friggen taxes on a piddly website folks. Come on. Bring it in.
Frank Geefay January 20, 2013 at 08:18 PM
I wouldn't mind paying 25% on my onshore or offshore billions. I wouldn't even mind paying 95% taxes on them. After all I need to leave a few hundred million for myself.
Mark Paxson January 20, 2013 at 08:20 PM
Pam ... I'm not sure why you directed that at me. Where did I say I object to doing something about exemptions? Where did I say I object to simplifying the tax code? But, since you brought it up ... the most sensible proposal for the mortgage deduction, which is what I believe Dems are proposing, is that it be capped. Which, of course, would mean it wouldn't hurt the middle class. What's even funnier is your source is the Simpson-Bowles Commission -- a report that went nowhere. What's even funnier is your suggestion that capping the mortgage interest deduction at the level of $500,000 mortgages which is what Simpson-Bowles proposed would hurt the middle class. Maybe you live in a different part of the world than I do -- but I don't know that many people in the middle class who has a $500,000 mortgage.
Don January 21, 2013 at 12:51 AM
The tax rate identified is artificially low. When you factor the reduced ceiling, now you know the real tax rate. Its called "bend over"
Andrew Peceimer January 21, 2013 at 02:05 AM
When has Obama brought up getting rid of a majority of tax deductions? That is his silever bullet. He loves to exclude the Goldend Gooses that donate to his campaign like Hollywood. http://www.foxnews.com/politics/2013/01/04/fiscal-crisis-package-loaded-up-with-special-interest-tax-breaks/ How can you all be so naive to not be believe that Obama is like most corrput politicians?
Dunesboy January 21, 2013 at 04:51 AM
Mark is correct and Pam is full of it. The GOP does not want to admit that getting rid of the mortgage deduction as well as credit paid for states taxes, (which is very helpful to California taxpayers), was part of the Paul Ryan budget plan that ALL of the GOP voted for ! Don't try to put it on the Democrats !
Racerx Gto January 21, 2013 at 05:08 AM
Every article or so, I read in the financial times that the Federal Reserve is printing trillions of dollars out of thin air. As we ping-pong jabs on this forum, at this very moment, the printing presses continue to print money. That would make taxation obsolete if the Federal Reserve can print money out of thin air to cover whatever they're spending. Regardless, none of what is happening today can sustain. It will all come to an ugly head. This stuff gives me a headache, let the accountants figure it out...
all-c-ing-eye January 21, 2013 at 05:22 AM
Simple solution = Make 2 Platinum Coins.
Cathy P. January 21, 2013 at 12:17 PM
@Pam Pinkston: I don't know anyone in the middle class with a $500,000 mortgage, nice try though.
Robert Livesay January 21, 2013 at 02:38 PM
I am not sure what you are saying. We pay Fed Taxes on net income not gross. So take away the deduction and some one will drop their gross income by say $20,000 or so. Now you pay taxes on that which does reduce your % on gross income. When someone says they are in a certain tax bracket it is before deductions. So after tax dedutions they may still be in the same but only pay taxes on the net. So a 100 thou at 25% gross can become 20% tax rate after deductions on gross but still 25% at net. Big difference.
Robert Livesay January 21, 2013 at 02:42 PM
Read it Dunesboy.
Kenny January 21, 2013 at 04:53 PM
Everyone throws the phrase "Middle Class" around like it really means something. In the last 16 years I have never read or heard of a clear definition of what it means to be in the "Middle Class". Can someone please help me on this?
Cathy P. January 21, 2013 at 05:10 PM
@Kenny: good question. Here are a couple definition sources. http://factcheck.org/2008/01/defining-the-middle-class/ http://www.csmonitor.com/USA/Latest-News-Wires/2012/0718/What-does-it-mean-to-be-middle-class http://news.consumerreports.org/money/2009/02/what-does-it-mean-to-be-middle-class-in-america-today.html http://www.pewsocialtrends.org/2008/04/09/inside-the-middle-class-bad-times-hit-the-good-life/ Clear as mud now eh?
Giorgio C. January 21, 2013 at 05:49 PM
How about giving the Fair Tax a closer look? http://www.fairtax.org/site/PageServer?pagename=HowFairTaxWorks I'll give up my home mortgage interest deduction because homeowners should not be treated as some special class of citizen. Home buying should be a personal choice, not something we are prodded to do by our elected officials who have done enough damage by meddling in this territory.
Andrew Peceimer January 21, 2013 at 05:56 PM
3.5 Trillion Obama Spending. 2.1 Trillion income. There is not enouch money from the rich to make up the difference. How do you all like the fact Obama just gave a raise to all federal employees when we are headed towards bankruptcy?
LG95618 January 22, 2013 at 11:52 PM
We need to cut spending, raise taxes to upper middle (~$200K/yr household) and upper class, completely revamp entitlement programs (just as the USA has had to phase out Union's...we can't afford them as they are) and quit bailing out big business. Put lifetime limits on all assistance programs, do not provide incentives to stay on the programs (more income for each extra child, hurt your back and get more money and time, etc....), cut defense waaaaay back and gut over priced current contracts. It's not a Rep or Dem thing...it's across the board.
LG95618 January 22, 2013 at 11:55 PM
Would not mind giving this a try.
Frank Geefay January 24, 2013 at 07:44 AM
Anonymous, although you go a bit further than I would I essentially agree with you. It is going to hurt everyone equally if we are to get serious about paying down the deficit and keeping the government running.

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