Happy New Year, 2013! The following are a few tax changes for 2013 that have been a concern for a few of our business clients. We thought that it would be helpful to share.
Tax Changes for Businesses
Standard Mileage Rates
The rate for business miles driven is 56.5 cents per mile for 2013, up from 55.5 cents per mile in 2012.
Section 179 Expensing
For 2013 the maximum Section 179 expense deduction for equipment purchases increases to $500,000 of the first $2,000,000 of business property placed in service during 2013. The bonus depreciation of 50% is also extended through 2013.
Work Opportunity Tax Credit (WOTC)
The WOTC is extended through 2013 (retroactive to 2012) and includes a one-year extension of the enhanced credit for hiring certain veterans. When a business hires a person from one of several specific economically disadvantaged groups it may claim a Work Opportunity Tax Credit, generally equal to 40 percent of the first $6,000 in wages paid to a new hire.
Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, for tax years beginning in 2013 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $125 (same as 2012). The monthly limitation for qualified parking is $240 (same as 2012).
Tax Changes for Individuals
Foreign Earned Income Exclusion
For taxable years beginning in 2012, the foreign earned income exclusion amount is $97,600, up from $95,100 in 2012.
Long-Term Capital Gains and Dividends
In 2013 tax rates on capital gains and dividends for taxpayers whose income is at or below $400,000 ($450,000 married filing jointly) remain the same as 2012 rates. As such, for taxpayers in the lower tax brackets (10% and 15%), the rate remains 0%. For taxpayers in the middle tax brackets, the rate is 15%. An individual taxpayer whose income is at or above $400,000 ($450,000 married filing jointly), the rate for both capital gains and dividends is capped at 20% (up from 15% in 2012).
Example: Married filing jointly with taxable income of $500k consisting of $200k of long term capital gain: $50k of the gain will be taxed at 20% and $150k at 15%.
Estate Tax
For an estate of any decedent during calendar year 2013, the basic exclusion amount is $5,120,000 (indexed for inflation–same as 2012). The maximum tax rate rises to 40% (up from 35% in 2012).
While this summary outlines important tax changes for 2013, additional changes in tax law are more than likely to arise during the year ahead.
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