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How to minimize your tax liability in 2013? (form 1040 focus). The following slides will only focus on deductions you can make on your 1040

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how to minimize your tax liability in 2013 form 1040 focus

How to minimize your tax liability in 2013? (form 1040 focus)

The following slides will only focus on deductions you can make on your 1040

Note: most of these changes will be written in the tax software you purchase for the season. The reason I put out these slides is for you to do a mental check if you miss something you are entitled to when you prepare your returns. Mostly, these slides can help you plan for next year. “You reap what you plant!”

Contact Information:

Diana Yang, CPA, MBA

email: dyangct@yahoo.com

www.dianayangcpa.com

Stay Tuned:

I will present a real estate investment and its related tax issues workshop in May. I am also a licensed real estate professional and I hope to answer some of the tax questions in that respect and help you to find the right property you are looking for, be it your home or your investment property.

slide2

Standard Deduction

  • 2012 2013
  • Married Joint $11,900 $12,200
  • Head of House $8,700 $8,950
  • Single $5,900 $6,100
  • Married Separate $5,900 $6,100
itemized deduction phase out pease out limitations
Itemized Deduction Phase-Out (“Pease Out Limitations”)
  •  No Pease Limitations for 2012
  •  For 2013:
  •  The Pease Limitations are reinstated
  •  Thresholds:
  •  Single - $250,000 AGI
  •  Head of Household - $275,000 AGI
  •  Married filing Joint and Surviving Spouse - $300,000 AGI
  •  Married filing Separately - $150,000 AGI
  •  Inflation adjusted for years after 2013
personal exemption phase out pep
Personal Exemption Phase-Out (PEP)
  •  For 2013:
  •  PEP is reinstated (there was no PEP in 2010, 2011, and
  • 2012)
  •  Thresholds:
  •  Single - $250,000 AGI
  •  Head of Household - $275,000 AGI
  •  Married filing Joint and Surviving Spouse - $300,000 AGI
  •  Married filing Separately - $150,000 AGI
  •  Inflation adjusted for years after 2013
slide5

AGI Limitation on Medical

Expenses Increases in 2013

 AGI haircut increases from 7.5% to 10%

 Same as AMT

 Deferred through 2017 for Age 65+

obamacare issues 1040 focus
Obamacare Issues (1040 focus)
  • 2013
  • Increased “HI” Tax on Income > $200,000
  • ($250,000 MFJ) – 0.9%
  • Surtax on Net Investment Income for High
  • Income Taxpayers –AGI > $200,000
  • ($250,000 MFJ) – 3.8%
  • FSA Maximum Annual Medical Expense
  • Limited to $2,500
  • Medical Itemized Deduction Threshold
  • Raised to 10%
  • Small Employer Health Care Credit
  • Child Age 26 Excludable Health Care
  • Benefits
  • Refundable Adoption Credit
  • Tanning Services 10% Tax
obamacare issues 1040 focus1
Obamacare Issues (1040 focus)
  • Medical Benefits – Child Under 27  Insurers must permit continued coverage for child <27
  • (age 26 for group plans)
  •  Health insurance of child <27 deductible if paid by
  • parent
  •  Even if self-employed
  •  Unless child eligible under employer subsidized plan
  •  Effective as of March 30, 2010
slide8

Sales Tax Deduction

  •  Available this year
  •  Set to sunset on December 31, 2013
  •  Individual itemized deduction, either:
  •  state and local income taxes, or
  •  state and local general sales taxes
slide9

Home Mortgage Interest

  •  IRS increasing audit attention (GAO)
  •  Sampling for $1 million limit
  •  Looking at Form 1098 changes
  •  PMI deduction extended
slide10

What is a Qualified Residence?

  •  Principal residence plus one other residence. For
  • example:
  •  House
  •  Condominium, cooperative
  •  Mobile home, house trailer
  •  Boat
  • Home Mortgage Debt Limit
  •  $1 million home acquisition indebtedness
  •  $100,000 home equity borrowing
  •  $1.1 million max on first and second home
  •  Acquisition is to buy, build or improve
  •  Or purchase interest of divorced spouse
slide11

Charitable Contributions

  •  Single cash contribution of $250 or more needs receipt
  • from charity
  •  No “goods or services” received provision
  •  Must receive receipt “contemporaneously
  • Noncash Contributions >$5,000
  •  Qualified appraisal on property
  •  Attach Form 8283 to tax return
  •  Obtain contemporaneous written
  • acknowledgment
slide12

Deducting Gambling Losses

  • Recordkeeping requirements (Rev.
  • Proc.77-29)
  •  Date and type of gambling
  •  Name and address of gaming establishment
  •  Name of other gamblers (if any)
  •  Amount won and amount lost
  •  Supporting documentation helpful
  •  Coin in, coin out report
  •  Lotteries—record of ticket purchases, dates
slide13

Miscellaneous Deductions (cont.)

  • Tier II – Subject to 2% of AGI
  •  Employee business expenses
  • Home office
  •  Education
  •  Legal fees (Be careful – not all are allowable!)
  •  Investment advice expenses
  • Tax return preparation fees
slide14

Miscellaneous Deductions (Tier II)

  • Tier II – Subject to 2% of AGI
  •  Employee business expenses
  • Home office
  •  Education
  •  Legal fees (Be careful – not all are allowable!)
  •  Investment advice expenses
  • Tax return preparation fees
slide15

Deductible Medical Expenses

  •  Strictly incurred primarily for the prevention or
  • alleviation of a physical or mental defect or illness
  •  Hospital, surgical, nursing, ambulance
  •  Medicine and drugs
  •  Dental and artificial teeth or limbs
  •  Long-term care services
slide16

Nondeductible Medical Expenses

  •  General health
  •  Nonprescription drugs and medicines
  •  Vitamins and herbal supplements
  •  Weight loss programs
  •  Dancing lessons and diaper services
  •  Cosmetic surgery
  •  Medical marijuana
slide17

Long-Term Care Insurance  2013 long-term care insurance limited

  •  For example: 60-70 years old: $3,640
  •  For example: over 70 years old: $4,550