For the latest information about developments related to Form 1040-C and its instructions, such as legislation enacted after
they were published, go to www.irs.gov/form1040c.
Use your 2012 tax return as a guide in figuring your 2013 tax, but be sure to consider the following.
New income tax rate of 39.6%.
The tax rate of 39.6% is for taxpayers whose income is over $450,000 ($425,000 if head of household, $400,000 if single,
$225,000 if married filing separately).
Limitation on itemized deductions.
Beginning in 2013, itemized deductions for taxpayers with adjusted gross income above $300,000 ($275,000 if head
of household, $250,000 if single, $150,000 if married filing separately) may be reduced.
Additional Medicare Tax.
For tax years beginning after December 31, 2012, a 0.9% Additional Medicare Tax applies to Medicare wages, Railroad
Retirement Tax Act compensation, and self-employment income over a threshold amount based on your filing status. You may
need to include this amount in your line 21 “other taxes.
” See the instructions for line 21, later.
Net Investment Income Tax.
For taxable years beginning after December 31, 2012, you may be subject to Net Investment Income Tax (NIIT). NIIT
is a 3.8% tax on the lesser of net investment income or the excess of modified adjusted gross income over a specified threshold
amount. The NIIT does not apply to nonresident aliens. See the instructions for line 21.
Medical and dental expenses.
Beginning January 1, 2013 you can deduct only the part of your medical and dental expenses that exceeds 10% (7.5%
if either you or your spouse attains the age of 65 before the close of the tax year) of the amount on line 17. This expense
does not apply to nonresident aliens.
Adoption credit and adoption assistance.
Beginning in 2013, the maximum adoption credit will be $12,970. The maximum amount of adoption assistance that can
be excluded from gross income is $12,970. The amount of the credit or excludable assistance begins to phase out for taxpayers
with modified AGI in excess of $194,580 and is completely phased out for taxpayers with modified AGI of $234,580 or more.
Alternative minimum tax (AMT) exemption amounts.
The AMT exemption is increased to $80,800 ($40,400 if married filing separately, $51,900 for all other taxpayers).
In addition, nonrefundable credits are allowed against AMT.
Capital gains and dividend rates for high-income individuals.
For tax year 2013, if your taxable income is more than $450,000 ($425,000 if head of household, $400,000 if single),
the capital gains and dividend rate will be 20%.
Personal exemption increased for certain taxpayers.
For tax years beginning in 2013, the personal exemption amount is increased to $3,900 for taxpayers with adjusted
gross income at or below $300,000 ($275,000 if head of household, $250,000 if single, $150,000 if married filing separately).
The personal exemption amount for taxpayers with adjusted gross income above this threshold may be reduced.
Social security and Medicare tax for 2013.
The rate of social security tax withholding (for employees only) is restored to 6.2% for wage payments made in 2013,
up to the social security wage limit of $113,700. The Medicare tax rate is 1.45%. There is no wage limit for Medicare tax.
The rate for net earnings from self-employment is 12.4%, up to the social security wage limit of
If you do not itemize your deductions, you may be able to take the 2013 standard deduction. The basic standard deduction
has increased for 2013. See Standard Deduction (Group I only), later.
Standard mileage rates.
The 2013 rate for business use of your vehicle is 56½ cents a mile. The 2013 rate for use of your vehicle to get medical
care or move is 24 cents a mile. The 2013 rate for charitable use of your vehicle remains at 14 cents a mile.