Personal Income Tax Mary B Pearson, CPA Assistant Professor of Accounting Topics Discussed: New Income Tax Legislation ◦ ◦ ◦ ◦ ◦ ◦ ◦ Income Tax Brackets Capital Gain Rates Investment & Medicare.
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Transcript Personal Income Tax Mary B Pearson, CPA Assistant Professor of Accounting Topics Discussed: New Income Tax Legislation ◦ ◦ ◦ ◦ ◦ ◦ ◦ Income Tax Brackets Capital Gain Rates Investment & Medicare.
Personal Income Tax
Mary B Pearson, CPA
Assistant Professor of Accounting
Topics Discussed:
New Income Tax Legislation
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Income Tax Brackets
Capital Gain Rates
Investment & Medicare Tax
Same Sex Marriage Filing
Medical Expense Deduction
Easier Business Use of Home Deduction
Expiring Deductions
Common Questions
Q&A
Report What????
2013 Tax Brackets
Tax Rate
Single
Married Filing Joint
10%
$0 - $8,925
$0 - $17,850
15%
$8,925 - $36,250
$17,850 - $72,500
25%
$36,250 - $87,850
$72.500 - $146,400
28%
$87,850 - $183,250
$146,400 - $223,050
33%
$183,250 - $398,350
$223,050 - $398,350
35%
$398,350 - $400,000
$398,350 - $450,000
39.6%
Over $400,000
Over $450,000
Capital Gains Tax Rates
Capital Gains tax is imposed on sale of
investment assets (stocks, land, rental
property) where the sales price exceeds
your basis. Still favorable tax
treatment on sale of personal
residences!
◦ In 2013, the new capital gains tax rate caps at
20% for tax payers in the 25% income tax
bracket and above.
◦ If you are in the 10% -15% tax bracket, the
capital gains rate is still 0%
Investment Income Tax Rates
Additional 3.8% tax on Net Investment
Income if:
◦ Adjusted Gross Income in excess of $200,000
single or $250,000 MFJ
Additional Medicare Tax
Additional Medicare Tax of .9% of
individuals with Adjusted Gross Income in
excess of:
◦ $200,000 Single
◦ $250,000 MFJ
Medical Expense Deduction
Take Advantage of Health Savings
Accounts (HAS)
◦ Tax Free Contributions
◦ New threshold for medical and dental
deduction is 10% for taxpayers under 65
makes it harder to deduct expenses as an
itemized deduction.
Estate and Gift Tax Amounts
2013 Estate limit is $5.00 million
◦ To decrease taxable estate an individual can
gift up to $14,000 per person per year, tax
free and not included in receivers income
◦ For a couple, they can gift $28,000 to a child,
grandchild, sister, brother… per year
Home Office Deduction
Simplified Home Office if using for other
business income
◦ $5 per square foot, caps at 300 square feet or
$1500
Deductions Scheduled to Expire
in 2014
Above the line Educator Deduction for
teachers in k-12 grades ($250)
Exclusion for Principle Residence
Indebtedness from Gross Income
Deduction for Mortgage Insurance
Premiums
Deduction for State and local sales tax
Above the line deduction for tuition and
related expenses
Credit for Residential Energy Credit
What am I???
Can I claim a relative?
Can I file HEAD OF HOUSEHOLD?
You are unmarried or considered
unmarried at the end of the year.
You paid more than one half the cost of
keeping up a home for the year.
A “Qualifying Person” lived with you in
the home for more than half the year.
Exception: school absences, dependent
parent
What is Self Employed Income?
Revenue: What did I make?
Deductions:
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Advertising
Car & Truck Expenses/Mileage = $.565 per mile
Contract Labor
Repairs
Licenses
Bank Fees
Expense or Depreciate Business Assets
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Computers/Desks/Equipment/Software
Insurances
Interest paid on Credit Cards
Legal and Professional Fees including tax prep fees and advice
Office Expenses
Rental costs for equipment & property, including storage shed fees
Travel Costs including meals and lodging
Supplies
Cell Phone & Internet Costs
Business Use of Home
Can I deduct Student Loan Interest?
Student Loan Interest: Can deduct up
to $2500 if AGI is less than $75,000
Single, $150,000 MGJ
Can I contribute to a Roth IRA?
Roth IRA: Non Deductible
◦ Can contribute up to $5500 if under 50 and
$6500 if over 50 and:
◦ AGI is less than $188,000 MFJ
◦ AGI is less than $127,000 Single
What are the 2013 Standard
Deductions?
Single: $6,100
Married Filing Joint: $12,200
Head of Household: $8,950
What are Itemized Deductions?
Medical and Dental Expenses
Personal Property Taxes on vehicles are
not deductible in Utah
Sales Tax vs. State Income Taxes
Real Estate Taxes
Mortgage Interest
Principle Mortgage Insurance Premiums
Charitable Contributions
Unreimbursed Employee Expenses
What credits can I take?
Child & Dependent Care Credit
Retirement Savings Credit: Eligible if you
contribute to a Retirement Account and AGI is
less than $60,000. (10% credit)
Child Tax Credit: $1,000 for each eligible
dependent under the age of 17. AGI cannot be
greater than $130,000 MFJ. (permanent)
Residential Energy Credit: Windows,
Exterior Doors, Insulation, Energy Efficient
Equipment (only in 2013)
Adoption Credit: $12,650 up to $229,710 AGI,
MFJ
Do I Qualify for Earned Income
Credit?
Maximum
Income MFJ
Maximum
Income Hof H
# Children
$ Credit
$51,567
$46,227
3
$6,044
$48,378
$43,038
2
$5,372
$43,210
$37,870
1
$3,250
$19,680
$14,340
0
$487
What Education Expenses can I
deduct?
Item
Education
Amount
Covered
Expenses
Income
Phase Out
American
Opportunity
Credit
4 years of
Post
Secondary
Education
$2,500 per yr
& student
40% of credit
is refundable
Tuition, Fees,
Books, and
Supplies
$180,000 MFJ
$90,000
Single
Lifetime
Learning
Credit
Post
Secondary
$2,000 per
taxpayer
20% of
expenses
Tuition, Fees,
Books, and
Supplies
$122,000 MFJ
$61,000
Single
Tuition &
Fees
Deduction
Post
Secondary
$4,000 per
year
Qualified
Tuition &
Fees
$160,000 MFJ
$80,000
Single/Hof H
Can I withdraw my 401K early?
Yes, but you will pay a penalty of 10% if
not used for:
◦ Unreimbursed medical expenses or medical
insurance premiums if over 10% of your AGI
◦ Total or Permanent Disability
◦ Higher Education Expenses
◦ Purchase of your first home
◦ IRS levy
◦ Qualified Reservist Distribution
Questions & Answers
Personal Income Taxes are due
Thursday, April 15th, 2014
Filing Period: Three years from the due
date of the return to claim a refund.
◦ EX: Due date April 15, 2014. You have until
April 15, 2017 to file or amend a 2013 return
for a refund.