My Personal Finance Journey

Category Archives for Taxes

Tax Changes For 2013 And What They Mean To Your Finances

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The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

For 2013, Congress has enacted some tax changes that could have an effect on your finances in the new year.  Because the national legislation changed tax regulations, many employees and small business owners will find that their personal income taxes and paychecks are affected.  In most cases, any withholding changes have been entered into the payroll system of the employer, so individuals will not have to take any additional withholding action. 
Here are some of the tax changes you can expect to see in 2013.

Tax Change #1: Expiration Of Social Security Payroll Tax Reduction

In 2013, the social security portion of the payroll tax is increasing from 4.2% to 6.2% for all workers.  This will reinstate the 2% temporary reduction in the tax passed by Congress in December of 2010.  This higher tax amount will be taken directly from the employee’s paycheck along with all other payroll taxes owed.  The increased deduction will begin with paychecks issued in January, affecting biweekly employees’ January 9 paychecks and monthly employees’ January 31paychecks.
This increase in the tax rate affects all Americans that earn a paycheck from an employer.  The tax reduction had increased the after-tax wages of employees and with the reduction reinstated, employees will see a reduction in their take home pay.  Experts have calculated that the average American family earning $50,000 annually will pay around $1,000 more out of their paychecks over the year to cover this tax rate increase. 

Tax Change #2: Top Marginal Tax Rate Increase

The top marginal income tax rate will increase to 39.6% from 35% for all taxable incomes of more than $450,000 for couples or $400,000 for single filers.  This is the result of legislation extending the Bush-era income tax cuts for filers earning incomes below this threshold, but allowing them to expire for higher incomes. 
This will not have a large effect on anyone making less than the threshold for the increased tax rate.  All of the other tax brackets – with marginal income rates of 10%, 15%, 25%, 28%, 33%, and 35% – will remain the same as prior years.  The new tax tables released by the IRS will provide guidance on the taxable income thresholds for each tax bracket. 

Tax Change #3: Personal Exemption Changes 

The personal exemption deduction will increase to $3,900, from $3,800 in 2012.  However, personal exemptions will be phased out for adjusted gross incomes of more than $300,000 for joint filers or $250,000 for single filers.  The personal exemption will be reduced by 2% for each $2,500 above the listed income thresholds.  The personal exemption is eliminated completely for those with adjusted gross incomes of $422,500 for couples filing jointly or $372,500 for individual filers.

Tax Change #4: Standard And Itemized Deduction Changes 

The standard deduction for married couples filing jointly will increase to $12,200, up from $11,900 in 2012.  The standard deduction for individuals will rise to $6,100 from $5,950 in 2012.  This will allow these filers to reduce their gross income a little bit farther, decreasing their tax liability and the amount that they will ultimately pay out of pocket if they owe taxes.
Itemized deductions will be limited for adjusted gross incomes of more than $300,000 for joint filers or $250,000 for single filers. The amount of the deductions allowed is reduced by 3% for incomes over the threshold.  This means that taxpayers that make more than the income threshold will not be able to take all of the deductions that they could previously take.  Medical expenses, investment interest, and gambling losses are not subject to the limit.

Tax Change #5: Alternative Minimum Tax Exemption Increase

For 2013, the Alternative Minimum Tax exemption amount has increased to $51,900 for individual filers and to $80,800 for married couples filing jointly.  In 2012, the exemption amounts were set at 50,600 for individual filers and $78,750 for joint filers.  In the future, the amounts will be indexed for inflation as set forth in the American Taxpayer Relief Act of 2012.  The Alternative Minimum Tax was designed to prevent some of the richest Americans from avoiding taxes by requiring them to give up some deductions due to their higher income.  It is estimated that nearly 4 million taxpayers are subject to the tax. 

Other Tax Changes To Be Aware Of

#6 – Earned Income Credit Increase – The maximum amount of the earned income credit allowed for those with three or more qualifying children will increase to $6,044 for married couples filing jointly.  This is an up from $5,891 allowed under the rules in 2012.

#7 – Capital Gains Tax Increase – The tax rate on dividends and capital gains will increase to 20% from 15% for taxable incomes over $450,000, or $400,000 for single filers.

#8 – Estate Tax Increase – For estates larger than $5 million, the tax rate will increase from 35% to 40%.  Beneficiaries will have a basic exclusion amount of $5,250,000, up from $5,120,000 allowed for the estates of decedents who died in 2012.

#9 – Investment Income Surtax – A 3.8% surtax will be levied on investment income for all taxpayers with taxable income exceeding $250,000 when filing jointly or $200,000 for single filers.

#10 – Increase In Wages Subject To Social Security Taxes – The amount of wages that are subject to Social Security taxes will increase in 2013.  The taxes will now be assessed on the first $113,700 of income, up from $110,000 in 2012.

#11 – Hospital Insurance Payroll Tax Increase – The Hospital Insurance portion of the payroll tax will increase by 0.9% for incomes over $250,000 for joint filers or $200,000 for single filers.  The additional tax will only apply to wages earned above this threshold, with the withholding beginning once the threshold is reached and continuing for the rest of the year.

How about you all? How will these tax changes affect you?


Share your concerns by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/68751915@N05/6355404323/

    What is Your Opinion of the Occupy Wall Street Protester Eviction in New York City?

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    Click here to enter my free $201.40 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is November 30th, 2011.


    On Tuesday of this week, New York City mayor, Michael Bloomberg, along with the help of several hundred police officers cleared Zuccotti Park in lower Manhattan of the ~200 Occupy Wall Street protesters who had been staying overnight at the park for nearly 2 months now. To view complete details on this story, click here to visit the New York Times article that provided coverage.

     Random fact: I learned about 2 weeks ago that the New York City Police Department has about 30,000 police officers. That’s almost the size of a large, multi-national corporation itself! Crazy! Much bigger than I would have expected!

    These ~200 Occupy Wall Street protesters had essentially made Zuccotti Park their primary home for nearly 60 days, and along with removing these overnight protesters from the park, their sleeping bags, food, tents, and possessions were also ousted as well.

    Reasons for the Eviction

    One reason behind the removal of the overnight protesters was that the park had essentially been taken over by the protesters and was not accessible or usable for anyone else. There were also health, hygiene, and safety concerns that contributed to the decision for the “eviction.” Even though the overnight protesters were removed, I was glad to find out that people with Occupy Wall Street signs can still come and exercise their right to free speech and express their opinions – they just cannot stay there in an overnight fashion.

    Effects on the Occupy Wall Street Movement

    Without a doubt, this removal of the overnight protesters at the birthplace of the Occupy Wall Street concept both has and will continue to deal a severe blow to 1) the psychology of the individual protesters across the nation and 2) how the overnight protesters are viewed from a legal perspective. I can imagine that if the Occupy camps in other cities have become too densely inhabited, the local governments can use the New York City expulsion as precedent. Indeed, several of the Occupy Wall Street movement camps in Oakland, CA were emptied earlier this week as well.

    Could the Eviction Have Been Avoided?

    As I was thinking about the eviction and the corresponding legal basis for it, I began to wonder if the protesters could have actually avoided it by being a little more disciplined in setting up their camps as far as what is allowable by law and is within health codes.

    For example, if they had put a limit on how densely occupied the areas could be and made sure that the place did not appear “trashy,” the eviction might not have occurred! However, that sort of thing would be VERY hard to control, and I guess we will really never know…

    My First-Hand Account of Occupy Wall Street

    Several weeks ago, I traveled to New York City with my girlfriend to watch her compete in the ING New York City marathon. It was a pretty awesome and memorable trip, and one of the things we got to do was visit the Occupy Wall Street camp in Zuccotti Park that was mentioned above. When we visited, I believe they were on their 45th day of occupying the park.

    Below are some pictures of my experience visiting Occupy Wall Street: I hope you enjoy! After looking through the pictures, I’d love to hear your opinion on the eviction of the Occupy Wall Street protesters. Be sure to share your take on the matter by commenting below!

    The first thing we saw on the way to Zuccotti Park (literally only a block away) was the construction of the new Freedom Tower around the site of the World Trade Center buildings. Below is a picture of the beautiful building. It’s pretty amazing to think that humans can build things so tall!

    Below is a picture of some of the protesters along with their camping equipment.

    Walking along the perimeter of the Park, there were a lot of people with signs yelling at the passer’s-by. The one guy with the hat in the picture below (directly below the “one-way” sign) was yelling to every man that passed, “HEY, DON’T BE THAT GUY!”

    The picture below REALLY (to me) shows just how densely packed the tents were of the protesters. Looking at an image like this, I can understand why the city could have seen this as “taking over the park and violating health/safety codes.”

    Shown below is a picture of all of the police monitoring matters. There’s quite a few of them!

    I learned that recently before we arrived to NYC, the company that owns Zuccotti Park had banned the protesters from using generators. Therefore, bikes were being ridden to capture mechanical energy to power their devices. Shown below is a picture of one of these bikes being ridden to generate electricity.

    The picture below shows what appeared to be the central food bank of the protester camp. I’d be curious to know if the supplies are funded by a particular organization or if they are 100% donations. The two guys in the picture below were being interviewed by a news camera when I walked by. I think they are pretty well-known, as I heard one of them mention this is something like his 20th protest.

    We mustered up enough courage to walk through the center (and only) passage-way through the protesters. I was surprised at how crowded this passage-way was and also by the number of protesters begging for money in the form of “donations” along the way vs. actually voicing their opinions about the wealth distribution in the country. Because of this, I became slightly concerned that many people had started using the Occupy Wall Street camp more as a place to stay for homeless people instead of a place to practice freedom of speech.

    How about you all? Do you feel Michael Bloomberg/the government acted appropriately in displacing the overnight Occupy Wall Street protesters? Was it a violation of the protesters’ rights, or was it a warranted action?


    Share your experiences by commenting below!

    H&R Block At Home Giveaway – Ends When All 5 Codes Are Taken!

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    Interested in receiving a free $25 Amazon gift card? Click here to sign up for my Cheapskate Jake “Cheapskates Need Love Too” giveaway!

    Happy Friday everyone! I am happy to report that last Saturday, I was able to get my tax preparation forms completed and sent off the the accountant. It took a few hours of focused effort on my part, but I am very glad to have finished it!

    Seeing as how it is tax season and that many of my friends and readers out there have mentioned that they do their taxes online using tax software (Turbotax 2011, etc), I wanted to give away a little tax season “present!”

    Or, in this case, 5 presents, to help you all get your taxes done and collect your refunds faster!

    I will be giving away 5 free copies of the H&R Block At Home Premium edition (online) valued up to $55 each (to cover the sales tax or part of state filings). You can enter the giveaway by doing any/all of the following:

    Note: You must leave a comment on this post with your email address and what steps you have taken to get points to win the software.

    1) Leave a comment below (be sure to include your email) to let me know you are participating and what you are doing to accumulate points – Worth 1 point 
    AND, if you leave a comment about your favorite tax tip – Worth 2 

    points 

    2) Refer a subscriber (send the email of the person you referred via my “Contact” tab above) – Worth 5 

    points

    3) Follow me on Twitter – Worth 1 

    point

    4) Subscribe to my website via email (Place your email in the Feedburner subscriber box on the right or click here) – Worth 2 points
    5) Link to this page from your website (send the link of the page you are linking to me from via my “Contact” tab above) – Worth 3 points
    6) Review my website on Alexa.com – Worth 1 point

    7) “Like” me on Facebook – Worth 1 point
    8) Leave a [value adding] comment on any other post on this site (comments already left do not count – be sure to leave your email address) – Worth 2 points
    9) Complete the My Personal Finance Journey site reader feedback questionnaire (only takes one minute) – Worth 3 points


    10) Participate in the Cheapskate Jake $25 Amazon gift card giveaway by clicking here and leaving a comment about your favorite cheapskate story!
    There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 50 points!

    In the event of a tie, I will be using Random.org to select the winner, and the coupon codes will be sent to your email that you provide when placing a comment.

    The deadline was March 4th, 2011 11:59 PM EST. However, since no one has signed up yet, the giveaway will continue until they are all taken! I will pick 5 random entries from the top scorers and email the code. Each person can win one copy.

    Disclaimer: I was provided a review copy of the H&R Block premium online edition, but that did not influence the content of this giveaway. The giveaway copies are also provided by H&R Block. I am also an affiliate of H&R Block and after I send the code, I am not responsible for anything further.

    How about you all? Do you all use an accountant or Do-It-Yourself tax software to file your taxes? Which do you think is better? 


    Share your experiences by commenting below!

      ***Photo courtesy of http://blogs.pitch.com/plog/block.jpg

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