Multi-State – New Tax Laws Take Effect

SALT Report 2006 – The bad news?  Approximately 77% of Americans will pay higher federal taxes in 2013. The good news?  The tax package passed by Congress on New Year’s Day will protect 99% of Americans from an income tax increase and provides more than 50 temporary tax breaks through 2013, which will save businesses and individuals approximately $76 billion.

The following are a few of the most significant tax changes for 2013:

The American Taxpayer Relief Act of 2012: The reduced income tax rates adopted in 2001 and 2003 for individuals earning up to $400,000 and families earning less than $450,000 will stay at the same level.  However, income above those levels will be taxed at 39.6%, up from 35%.  The 15% bracket for joint filers, aka marriage penalty relief, has been extended permanently for wages paid after December 31, 2012.

Medical Device Tax: The Medical Device Excise Tax is a 2.3% tax based on the sale price of medical devices sold in the U.S. by the manufacturer, producer or importer of the device.  The tax went into effect on January 1, 2013. Revenues from the tax will be used to help finance the Affordable Health Care Act.

Bonus Depreciation:  Businesses are able to take a 50% to 100% depreciation deduction on the cost of certain business equipment and machinery in the first year the property is placed in service. The law was set to expire at the end of 2012 however; the new law extends the 50% bonus depreciation deduction through 2013.

Personal and Dependent Exemption Deduction Phase-Out: Personal and dependent exemption write-offs will be reduced or completely eliminated.  The phase-out starts at $250,000 for single filers, $300,000 for married joint-filing couples, $275,000 for heads of households, and $150,000 for married individuals who file separate returns.

Social Security:  Employee tax rates have returned to 6.2% for 2013 wages up to $113,700. Prior to 2013, the Social Security tax rate was 4.2%.

Additional Medicare Tax:  This tax applies to single individuals earning over $200,000 and married couples who file jointly and earn over $250,000. However, employers are required to withhold the Additional Medicare Tax from all workers, regardless of marital status, if they earn over $200,000. Therefore, the employee Medicare tax rate, which is normally 1.45%, will rise to 2.35% on earnings over $200,000 regardless of filing status.   Alternatively, the employer Medicare tax rate will remain at 1.45%.

Non-Tax Laws of Interest

Driving:  AB 1536 allows drivers to use voice activated texting and emailing devices while driving. AB 1708 allows drivers to use electronic devices, such as smart phones, to provide paperless proof of insurance and registration.  SB 1298 allows driverless cars to operate on public roads as long as a licensed driver remains present.

College Textbooks:  Students in lower-division courses in the University of California, California State University, or the California Community College systems will have free digital access to 50 textbooks. Hard copies will be available for $20.

Internet Privacy: University officials and private employers can no longer ask students, employees, or job applicants for the passwords to their email or social media accounts such as Twitter and Facebook.

Everyone will see their taxes increase in 2013. Now, more than ever, you need the assistance of experienced professionals to advise you and help you create the best plan for you and your business.

For Further Information:

The American Taxpayer Relief Act of 2012