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2013 tax code changes: The good and the bad (Part 2)

February 4, 2013

When it comes to Congress’s resolution to avert the fiscal cliff, there will be a negative impact for many Americans, but it isn’t all bad news. Congress did extend and, in some cases, even increase several protections and exemptions that will benefit quite a few families.

Despite a hike in the top federal estate tax rate from 35% to 40%, the amount of the exemption was boosted permanently to $5 million and adjusted annually for inflation. In 2013, that equates to a $5.25 million exemption. If Congress and the President had failed to address the estate tax issue, the exemption would have dropped to $1 million, and it would have lost its portability—a provision that allows the unused portion of an estate tax exmption to pass to a surviving spouse. This essentially doubles the exemption limit in many cases.

Standard deductions also went up: Married couples can now claim a $12,200 deduction. That number increase to $13,400 if one spouse is 65 or older, and $14,600 is both spouses are over the age of 65. In 2013, 401(k) annual contribution limits are also up, increasing to $17,500 for those under the age of 50, and $23,000 for the over 50 crowd. Even IRA contribution limits have increased $500, up to $5,500 now, with a $1,000 annual catch-up bonus for those over the age of 50.

The bottom line is that it’s a mixed bag, with tax and savings changes both positive and negative for your finances, and it makes sense to plan for the future with your financial advisor.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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