The IRS has several changes in store for 2013. Here are five that you should know to help you plan your finances in the coming year.
- A slight increase in the amount of money that can be put into retirement accounts such as 401k accounts takes effect on January 1, 2013. The new amount is $17,500, a $500 increase. If you maxed out in 2012, adjust your rate beginning with your first paycheck of the year for the least noticeable change in your take home pay.
- The IRS is also increasing the amount of adjusted gross income you can make and still contribute to a Roth IRA. Married couples will be able to earn up to $188,000, while singles can earn up to $127,000. Those under 50 can contribute up to $5,000 each and those over 50 can save up to $6,000 due to the catch up rules.
- For those concerned about gift taxes, in 2013 each person can receive up to $14,000 in gifts tax free. This tax is usually considered by families in their estate planning.
- Flexible Spending Accounts are headed in the opposite direction. In years past you could set aside up to $5,000 to pay for dependant care or medical expenses, but in 2013 it will be capped at $2,500. Don’t forget that FSAs have the added disadvantage of a use it or lose it policy – if you don’t spend the money by the deadline, the money reverts back to your employer.
- Parents who have set up 529 accounts for college savings will want to note that the kiddie tax has been increased to $1,000. This means that the first $1,000 earned in interest in a child’s name is tax free income.