Personal Income Tax Mary B Pearson, CPA Assistant Professor of Accounting

Topics Discussed: New Income Tax Legislation ◦ Income Tax Brackets ◦ Capital Gain Rates ◦ Investment & Medicare Tax ◦ Same Sex Marriage Filing ◦ Medical Expense Deduction ◦ Easier Business Use of Home Deduction ◦ Expiring Deductions Common Questions Q&A

Report What????

2013 Tax Brackets Tax RateSingleMarried Filing Joint 10%$0 - $8,925$0 - $17,850 15%$8,925 - $36,250$17,850 - $72,500 25%$36,250 - $87,850$ $146,400 28%$87,850 - $183,250$146,400 - $223,050 33%$183,250 - $398,350$223,050 - $398,350 35%$398,350 - $400,000$398,350 - $450, %Over $400,000Over $450,000

Capital Gains Tax Rates Capital Gains tax is imposed on sale of investment assets (stocks, land, rental property) where the sales price exceeds your basis. Still favorable tax treatment on sale of personal residences! ◦ In 2013, the new capital gains tax rate caps at 20% for tax payers in the 25% income tax bracket and above. ◦ If you are in the 10% -15% tax bracket, the capital gains rate is still 0%

Investment Income Tax Rates Additional 3.8% tax on Net Investment Income if: ◦ Adjusted Gross Income in excess of $200,000 single or $250,000 MFJ

Additional Medicare Tax Additional Medicare Tax of.9% of individuals with Adjusted Gross Income in excess of: ◦ $200,000 Single ◦ $250,000 MFJ

Medical Expense Deduction Take Advantage of Health Savings Accounts (HAS) ◦ Tax Free Contributions ◦ New threshold for medical and dental deduction is 10% for taxpayers under 65 makes it harder to deduct expenses as an itemized deduction.

Estate and Gift Tax Amounts 2013 Estate limit is $5.00 million ◦ To decrease taxable estate an individual can gift up to $14,000 per person per year, tax free and not included in receivers income ◦ For a couple, they can gift $28,000 to a child, grandchild, sister, brother… per year

Home Office Deduction Simplified Home Office if using for other business income ◦ $5 per square foot, caps at 300 square feet or $1500

Deductions Scheduled to Expire in 2014 Above the line Educator Deduction for teachers in k-12 grades ($250) Exclusion for Principle Residence Indebtedness from Gross Income Deduction for Mortgage Insurance Premiums Deduction for State and local sales tax Above the line deduction for tuition and related expenses Credit for Residential Energy Credit

What am I???

Can I claim a relative?

Can I file HEAD OF HOUSEHOLD? You are unmarried or considered unmarried at the end of the year. You paid more than one half the cost of keeping up a home for the year. A “Qualifying Person” lived with you in the home for more than half the year. Exception: school absences, dependent parent

What is Self Employed Income? Revenue: What did I make? Deductions: ◦ Advertising ◦ Car & Truck Expenses/Mileage = $.565 per mile ◦ Contract Labor ◦ Repairs ◦ Licenses ◦ Bank Fees ◦ Expense or Depreciate Business Assets  Computers/Desks/Equipment/Software ◦ Insurances ◦ Interest paid on Credit Cards ◦ Legal and Professional Fees including tax prep fees and advice ◦ Office Expenses ◦ Rental costs for equipment & property, including storage shed fees ◦ Travel Costs including meals and lodging ◦ Supplies ◦ Cell Phone & Internet Costs ◦ Business Use of Home

Can I deduct Student Loan Interest? Student Loan Interest: Can deduct up to $2500 if AGI is less than $75,000 Single, $150,000 MGJ

Can I contribute to a Roth IRA? Roth IRA: Non Deductible ◦ Can contribute up to $5500 if under 50 and $6500 if over 50 and: ◦ AGI is less than $188,000 MFJ ◦ AGI is less than $127,000 Single

What are the 2013 Standard Deductions? Single: $6,100 Married Filing Joint: $12,200 Head of Household: $8,950

What are Itemized Deductions? Medical and Dental Expenses Personal Property Taxes on vehicles are not deductible in Utah Sales Tax vs. State Income Taxes Real Estate Taxes Mortgage Interest Principle Mortgage Insurance Premiums Charitable Contributions Unreimbursed Employee Expenses

What credits can I take? Child & Dependent Care Credit Retirement Savings Credit: Eligible if you contribute to a Retirement Account and AGI is less than $60,000. (10% credit) Child Tax Credit: $1,000 for each eligible dependent under the age of 17. AGI cannot be greater than $130,000 MFJ. (permanent) Residential Energy Credit: Windows, Exterior Doors, Insulation, Energy Efficient Equipment (only in 2013) Adoption Credit: $12,650 up to $229,710 AGI, MFJ

Do I Qualify for Earned Income Credit? Maximum Income MFJ Maximum Income Hof H # Children$ Credit $51,567$46,2273$6,044 $48,378$43,0382$5,372 $43,210$37,8701$3,250 $19,680$14,3400$487

What Education Expenses can I deduct? ItemEducationAmountCovered Expenses Income Phase Out American Opportunity Credit 4 years of Post Secondary Education $2,500 per yr & student 40% of credit is refundable Tuition, Fees, Books, and Supplies $180,000 MFJ $90,000 Single Lifetime Learning Credit Post Secondary $2,000 per taxpayer 20% of expenses Tuition, Fees, Books, and Supplies $122,000 MFJ $61,000 Single Tuition & Fees Deduction Post Secondary $4,000 per year Qualified Tuition & Fees $160,000 MFJ $80,000 Single/Hof H

Can I withdraw my 401K early? Yes, but you will pay a penalty of 10% if not used for: ◦ Unreimbursed medical expenses or medical insurance premiums if over 10% of your AGI ◦ Total or Permanent Disability ◦ Higher Education Expenses ◦ Purchase of your first home ◦ IRS levy ◦ Qualified Reservist Distribution

Questions & Answers Personal Income Taxes are due Thursday, April 15 th, 2014 Filing Period: Three years from the due date of the return to claim a refund. ◦ EX: Due date April 15, You have until April 15, 2017 to file or amend a 2013 return for a refund.