Recently I’ve been getting asked a lot what the impact will be of tax changes in 2013, and how it will affect a given individual. I know it can be frustrating to hear it, but unfortunately there still isn’t much certainty on what taxes will look like in the next few years. Trust me, it’s especially frustrating for other enrolled agents/tax preparers, as we have to deal with this stuff every day.
But unless Congress makes a change pretty soon, the Bush tax cuts are set to automatically expire at the end of 2012. In general, that will mean an increase in income tax liability for 2013. Some specific provisions:
- Marginal income tax rates: The lowest tax bracket will increase from 10% to 15% and the top bracket will increase from 35% to 39.6%, with most of the brackets in between increasing as well.
- Marriage penalty: Currently the 25% bracket for a married couple starts at twice the level as it does for an individual. Next year that will change (the married bracket will drop from 200% of the individual bracket to 167%), meaning married couples would pay more tax in 2013.
- Long term capital gains rates: Long term capital gains are currently taxed at either 0% or 15% (depending on your overall tax bracket), which are set to increase to 10% and 20%, respectively.
- Dividend rates: These will also increase in 2013.
Keep in mind, though, that it’s not too late for something to change. In general, Congress has had a tendency to wait until the last minute to make changes to the tax code, meaning changes might not happen until December or even into next year.
Do you have the support you need to manage your small business bookkeeping?
Contact us to schedule an appointment to speak with a local small business advisor.