By Bert Seither, Director of Operations at Corporate Tax Network
About the author: Bert Seither is the Director of Operations at Corporate Tax Network, a national accounting and business development firm. For nearly 10 years, Seither has assisted small business owners to help put their companies on a path to prosperity.
The United States federal tax code spans over 70,000 pages in length, and the laws outlined in it continue to evolve frequently over time. That is why it can be a challenge to keep up with the latest IRS laws and how they affect you. Here are some recent tax law changes to know about that could impact your tax-filing situation now or in the near future:
1. Energy-efficiency tax credits offered for certain improvements, including the installation of insulated hot water heaters, insulation, and double-paned windows, are expiring after 2013. If you have thought about making such improvements to a home or office, make sure they are made before the calendar turns to 2014. Eligible items for these tax credits are marked by their manufacturers. It’s essential to save all relevant receipts and documentation for the installation of any eligible items.
2. The popular child tax credit, which offers parents a maximum credit amount of $1,000 per child under age 17, is now considered a permanent benefit. Like other tax credits, the amount of this credit is limited for certain income earners. They include married couples filing jointly who have an annual income of over $110,000, single/head-of-household/qualified widow(er) filers who make $75,000, and married couples who file their taxes separately and earn $55,000 per year. The renewable part of this credit is currently set to expire in 2017.
3. The dependent care tax credit as it stands at its current levels and calculations is considered a permanent tax benefit.
4. Because of a Supreme Court decision on the Defense of Marriage Act (DOMA) this past summer, the IRS now allows legally married same-sex couples to file their taxes jointly instead of filing as two separate tax-paying individuals.
5. The allowance of charitable distributions that are tax-free and made directly from an IRA to a qualified charity by those age 70½ and older was continued through 2013. The maximum contribution amount for this particular benefit is limited to $100,000.
6. A few tax benefits related to education have been renewed, while others are set to expire. The American Opportunity Tax Credit was extended through 2017. Plus, the current provisions for Coverdell Education Savings Accounts are now permanent fixtures on the books. Employer-provided education assistance benefits are now permanent as well. Finally, the student loan interest tax deduction is now permanent. On the other hand, the tuition deduction is expiring after 2013.
7. The Earned Income Tax Credit (EITC), which is a refundable tax credit for certain income earners, is set for expiration in 2017. However, some accounting experts predict it will eventually be renewed beyond that year.
8. As it currently stands, the 2013 estate tax exemption is set at $5,250,000. The top tax rate for it is 40%. If your estate is valued at less than this limit amount and you die by Dec. 31, no estate tax return would have to be filed with the IRS, and no estate tax would be levied.
