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Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates. These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

2013 Income Tax Information

The Income Tax Rates for 2013

2013 Standard Deduction

Married couples filing a joint return - $12,200

Single return filers - $6,100

2013 Personal Exemption Amount - $3,900

Taxation of Dividends and Long Term Capital Gains

For taxpayers in the 10% and 15% brackets, qualifying dividends and long term capital gains (assets held for more than a year) will be taxed at 0%. For those in 25%, 28%, 33% and 35% tax brackets, the tax rate on dividends and long term capital gains is 15%. For those in the top 39.6% bracket, the tax rate is 20%.

2013 Medicare Surtaxes

As part of the health care reform enacted in 2010, additional Medicare surtaxes begin in 2013 for high income wage earners and high income investors. The surtaxes apply when a single taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds a threshold of $200,000 or joint return filers when their MAGI exceed $250,000.

• For wage earners, an additional 0.9% Medicare surtax applies to wages (including bonuses and self-employment income) above the threshold amounts.
• For investors, an additional 3.8% Medicare surtax applies to net investment income (taxable interest, dividends, capital gains, etc.) in excess of the thresholds.

Estate Taxes

Regular IRA and Roth IRA Contribution Limits

401(k) Retirement Plan Contribution Limits

Coverdell Education Savings Accounts (Education IRAs)

For 2013, the annual contribution limit is $2000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 of Adjusted Gross Income (some modifications apply).

Annual Gift Tax Exclusion

For 2013, gifts of $14,000 and under are not subject to gift tax.

Payroll Taxes - Social Security and Medicare

2013 Employee wages subject to Social Security tax of 6.2% - $113,700.

2013 Employee wages subject to Medicare tax of 1.45% on all wages and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.

2013 Self employment income subject to Social Security tax of 12.4% - $113,700.

2013 Self employment income subject to Medicare tax of 2.9% on all self employment income and an additional 0.9% on wages above $200,000 for taxpayers filing single returns. For taxpayers filing joint returns, the additional 0.9% applies to wages above $250,000.

Notes - The 0.9% additional Medicare tax was part of the health care reform bill and only applies to the employee portion. Employers do not match the additional Medicare tax.

Social Security Benefits

2013 Average monthly benefit for all retired workers - $1,261.

2013 Average monthly benefit for retired couples - $2,048.

2013 Maximum monthly benefit for a worker at full retirement age - $2,533.