Tax Law changes - 2013

The foreign earned income exclusion rose to $97,600 up from $95,100 in 2012.

The amount used to reduce the net unearned income reported on a childs tax return subject to the kiddie tax has increased to $1,000, up from $950 in 2012.

The annual gift tax exclusion increases to $14,000 in 2013, up from $13,000 in 2012.

Beginning in 2013, the threshold for deducting medical expenses as an Itemized Deduction will increase from 7.5% of Adjusted Gross Income (AGI) to 10% of AGI.
Taxpayers who are 65 and older, however, are granted an exception, and will still be able to deduct medical expenses that exceed 7.5% of their AGI.
The exception for taxpayers 65 and older will continue through 2016, and all taxpayers will be subject to the 10% threshold in 2017.

Only a small percentage of home sellers will pay the 3.8% surtax. Only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. The tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.
The tax calculation will be the LESSER of the Investment income amount OR the Excess of AGI over the $200,000 or $250,000 thresholds x 3.8%.

The 3.8% tax on Investment income will fall on individuals with an (AGI) adjusted gross income above $200,000 and couples filing a joint tax return with more than $250,000 AGI.
The calculation will be the LESSER of the Investment income amount OR the Excess of AGI over the $200,000 or $250,000 thresholds.

Generally, Net Investment Income will include interest, dividends,capital gains, annuities,royalties and rents and other income attributable to passive activities.
Gains on the sale of property not used in an active business and income from the investment of working capital are treated as investment income.
Net Investment Income is gross income or net gain reduced by deductions allocated to the income or gain.
It does not include distributions from qualified plans,401(k) plans, IRS's, and eligible 457 plans or municipal bond interest or life insurance proceeds.
The tax will not apply to the first $250,000 on profits from the sale of a personal residence, or to the first $500,000 in the case of a married couple selling their home.