Filers’ Cheat Sheet: Recap of 2013 Tax Law Changes

As you prepare to file your 2013 income tax return, you will need to know some of the tax law changes that occurred last year.

After all, the year started off with federal tax developments on new year’s day with the passage of the American Taxpayer Relief Act of 2012 (ATRA), which permanently extended the Bush-era tax cuts for all but the highest income taxpayers.

Listed below are some highlights of tax law changes during 2013 that may affect your tax situation:

Same Sex Marriages. Married same-sex couples may now use the filing status of married filing joint. Please note that you must have been married in a state that recognizes same-sex marriages (rather than civil unions). You don’t need to reside in that state in order to file jointly.

New Medicare Taxes. Effective Jan. 1, 2013, the Affordable Care Act imposed two new Medicare taxes on qualified taxpayers: a 3.8% net investment income tax and 0.9% Additional Medicare tax. Generally, these taxes will affect you if your income exceeds $200,000 (single) or $250,000 (married filing joint), $125,000 (married filing separately).

Health Savings Accounts (HSA). If you have a high-deductible health insurance plan and an HSA, you may contribute $3,250 (individual plan) or $6,450 (family coverage plan) for 2013. The contribution limits increase to $3,300 or $6,550 respectively for 2014.

Broker Reporting. The IRS issued final regulations on the requirement that brokers report the basis of debt instruments and options that they sell on behalf of customers. If you deal in these types of investments, your 1099 should now include basis of any sell transactions.

Casualty/Theft Losses. In a court ruling last year, the IRS allowed a theft loss resulting from home repair fraud. If you found yourself the victim of this type of fraud or any other bad investments resulting from fraud (say for example, a Ponzi scheme), you may be able to write it off.

IRA Contribution and other Retirement Plan Limits. For both 2013 and 2014, IRA contributions are allowed up $5,500. If you are entitled to make catch-up contributions, you may add an additional $1,000. For defined contribution plans, the limit is $51,000 for 2013 and $52,000 for 2014. Check with your employer as other restrictions may apply.

Standard Mileage Rates. For 2013, the standard mileage rate is 56.5 cents, medical and moving is 24 cents, charitable is 14 cents. The rates for 2014 decrease to 56 cents, and 23.5 cents respectively. The charitable rate remains the same as it is set by statute.

Per Diem Rates. Prior to Sept. 30, 2013 the per diem rates for travel and meals were set at $242 for high-cost areas and $163 for low-cost areas. These rates increase after September 30, 2013 to $251 and $170 respectively.

Home Office Deduction. The IRS announced a new optional method to determine your home office deduction which will no longer require tracking actual expenses. The maximum deduction allowed under this safe harbor method is $1,500 based on 300 square feet. For most of you, tracking actual expenses will result in a higher deduction.