Contribution Limits 2013

Contributions for retirement accounts increase across the board in 2013. Here are the different limits.

• Traditional and Roth IRA: $5,500 for each individual; Additional $1,000 if you are age 50 and older.

• Contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000. 

• Married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.

• Roth IRA contributions begin phasing out at $178,000 for married couples. Contributions can not be made once income reaches $188,000 of income.

• Roth contributions for single filers are excluded with income of $127,000 and higher. Phase outs begin at $112,000 for singles and head of households.

• 401k & 403b plans: $17,500 for each individual; Additional $5,500 if you are age 50 and older.

• SIMPLE IRA contributions are $12,000. Catch-up contributions are limited to $2,500.

• You can put away up to 25% of gross income to a SEP IRA in 2013, with a cap at $51,000.

Tax Hoops in 2013

Here are the key points of the new tax law agreed to by the Obama Administration and Congress.

• Married couples with income over $450,000 and singles with $400,000 of income will have a top tax rate of 39.6%.

• The next highest rate is 33%. All tax rates do not expire on a specific date.

• Deductions and exemptions start to phase out for married couples with $300,000+ of income. This makes the real top rate 41% and 34.2% for those in the 33% bracket.

• The Alternative Minimum Tax (AMT) now has a permanent patch. Increases to the $78,75o exemption are now tied to inflation, similar to Social Security benefits.

• The estate tax was raised to 40% but the $5,000,000 exemption for each spouse and transferability remain.

• Capital gains and dividends rates go up to 20%. Those with income above certain levels will also pay an additional 3.8% Health Care Tax to pay for Obama Care.

• Businesses will have additional tax breaks. Section 179 limit for expensing equipment is $500,000 for 2013. There is also a 50% bonus depreciation for new equipment.

• S corps that were converted from C corps will be allowed to waive the built in gains tax for assets sales completed in 2013.

• Pay roll taxes go back up to their normal 6.2%. They had been 2% lower for the past 3 years.

• State income taxes or local sales taxes can be deducted on your annual tax return.

• Up to $2 million of forgiven mortgage debt on a principal residence will not be taxable in 2013. This special provision was scheduled to expire on December 31st, 2012 but was brought back for one more year.