Personal Income Tax
Mary B Pearson, CPA
Assistant Professor of Accounting
Topics Discussed:
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New Income Tax Legislation
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Income Tax Brackets
Capital Gain Rates
Investment & Medicare Tax
Same Sex Marriage Filing
Medical Expense Deduction
Easier Business Use of Home Deduction
Expiring Deductions
Common Questions
 Q&A
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Report What????
2013 Tax Brackets
Tax Rate
Single
Married Filing Joint
10%
$0 - $8,925
$0 - $17,850
15%
$8,925 - $36,250
$17,850 - $72,500
25%
$36,250 - $87,850
$72.500 - $146,400
28%
$87,850 - $183,250
$146,400 - $223,050
33%
$183,250 - $398,350
$223,050 - $398,350
35%
$398,350 - $400,000
$398,350 - $450,000
39.6%
Over $400,000
Over $450,000
Capital Gains Tax Rates
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Capital Gains tax is imposed on sale of
investment assets (stocks, land, rental
property) where the sales price exceeds
your basis. Still favorable tax
treatment on sale of personal
residences!
◦ In 2013, the new capital gains tax rate caps at
20% for tax payers in the 25% income tax
bracket and above.
◦ If you are in the 10% -15% tax bracket, the
capital gains rate is still 0%
Investment Income Tax Rates
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Additional 3.8% tax on Net Investment
Income if:
◦ Adjusted Gross Income in excess of $200,000
single or $250,000 MFJ
Additional Medicare Tax
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Additional Medicare Tax of .9% of
individuals with Adjusted Gross Income in
excess of:
◦ $200,000 Single
◦ $250,000 MFJ
Medical Expense Deduction
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Take Advantage of Health Savings
Accounts (HAS)
◦ Tax Free Contributions
◦ New threshold for medical and dental
deduction is 10% for taxpayers under 65
makes it harder to deduct expenses as an
itemized deduction.
Estate and Gift Tax Amounts
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2013 Estate limit is $5.00 million
◦ To decrease taxable estate an individual can
gift up to $14,000 per person per year, tax
free and not included in receivers income
◦ For a couple, they can gift $28,000 to a child,
grandchild, sister, brother… per year
Home Office Deduction
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Simplified Home Office if using for other
business income
◦ $5 per square foot, caps at 300 square feet or
$1500
Deductions Scheduled to Expire
in 2014
Above the line Educator Deduction for
teachers in k-12 grades ($250)
 Exclusion for Principle Residence
Indebtedness from Gross Income
 Deduction for Mortgage Insurance
Premiums
 Deduction for State and local sales tax
 Above the line deduction for tuition and
related expenses
 Credit for Residential Energy Credit
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What am I???
Can I claim a relative?
Can I file HEAD OF HOUSEHOLD?
You are unmarried or considered
unmarried at the end of the year.
 You paid more than one half the cost of
keeping up a home for the year.
 A “Qualifying Person” lived with you in
the home for more than half the year.
Exception: school absences, dependent
parent
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What is Self Employed Income?
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Revenue: What did I make?
Deductions:
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Advertising
Car & Truck Expenses/Mileage = $.565 per mile
Contract Labor
Repairs
Licenses
Bank Fees
Expense or Depreciate Business Assets
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Computers/Desks/Equipment/Software
Insurances
Interest paid on Credit Cards
Legal and Professional Fees including tax prep fees and advice
Office Expenses
Rental costs for equipment & property, including storage shed fees
Travel Costs including meals and lodging
Supplies
Cell Phone & Internet Costs
Business Use of Home
Can I deduct Student Loan Interest?
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Student Loan Interest: Can deduct up
to $2500 if AGI is less than $75,000
Single, $150,000 MGJ
Can I contribute to a Roth IRA?
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Roth IRA: Non Deductible
◦ Can contribute up to $5500 if under 50 and
$6500 if over 50 and:
◦ AGI is less than $188,000 MFJ
◦ AGI is less than $127,000 Single
What are the 2013 Standard
Deductions?
Single: $6,100
 Married Filing Joint: $12,200
 Head of Household: $8,950
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What are Itemized Deductions?
Medical and Dental Expenses
 Personal Property Taxes on vehicles are
not deductible in Utah
 Sales Tax vs. State Income Taxes
 Real Estate Taxes
 Mortgage Interest
 Principle Mortgage Insurance Premiums
 Charitable Contributions
 Unreimbursed Employee Expenses
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What credits can I take?
Child & Dependent Care Credit
Retirement Savings Credit: Eligible if you
contribute to a Retirement Account and AGI is
less than $60,000. (10% credit)
 Child Tax Credit: $1,000 for each eligible
dependent under the age of 17. AGI cannot be
greater than $130,000 MFJ. (permanent)
 Residential Energy Credit: Windows,
Exterior Doors, Insulation, Energy Efficient
Equipment (only in 2013)
 Adoption Credit: $12,650 up to $229,710 AGI,
MFJ
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Do I Qualify for Earned Income
Credit?
Maximum
Income MFJ
Maximum
Income Hof H
# Children
$ Credit
$51,567
$46,227
3
$6,044
$48,378
$43,038
2
$5,372
$43,210
$37,870
1
$3,250
$19,680
$14,340
0
$487
What Education Expenses can I
deduct?
Item
Education
Amount
Covered
Expenses
Income
Phase Out
American
Opportunity
Credit
4 years of
Post
Secondary
Education
$2,500 per yr
& student
40% of credit
is refundable
Tuition, Fees,
Books, and
Supplies
$180,000 MFJ
$90,000
Single
Lifetime
Learning
Credit
Post
Secondary
$2,000 per
taxpayer
20% of
expenses
Tuition, Fees,
Books, and
Supplies
$122,000 MFJ
$61,000
Single
Tuition &
Fees
Deduction
Post
Secondary
$4,000 per
year
Qualified
Tuition &
Fees
$160,000 MFJ
$80,000
Single/Hof H
Can I withdraw my 401K early?
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Yes, but you will pay a penalty of 10% if
not used for:
◦ Unreimbursed medical expenses or medical
insurance premiums if over 10% of your AGI
◦ Total or Permanent Disability
◦ Higher Education Expenses
◦ Purchase of your first home
◦ IRS levy
◦ Qualified Reservist Distribution
Questions & Answers
Personal Income Taxes are due
Thursday, April 15th, 2014
 Filing Period: Three years from the due
date of the return to claim a refund.
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◦ EX: Due date April 15, 2014. You have until
April 15, 2017 to file or amend a 2013 return
for a refund.