2013 IRS Changes – What You Need to Know Now

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
Also, read >  IRS Tax Tips: Crackdown on Automatic Gratuities