The IRS has released the tax tables for 2013 as well as the cost-of-living adjustments for inflation for certain tax items.
But wait… before you read any further, promise me something? You understand that these are the applicable rates for the tax year 2013, right? They are NOT the rates that you’ll use to prepare your 2012 tax returns in 2013 but rather the rates that you’ll use to prepare your 2013 tax returns in 2014. I know it’s confusing but promise you won’t mix up the two (or at least that you’ll trust your tax preparer to keep them straight).
The IRS has also indexed a few credits for 2013. Here are the updated amounts:
Adoption Credit. The maximum credit allowable is $12,970. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) over $194,580 and the credit is completely phased out for taxpayers with MAGI of more than $234,580. By way of explanation, your MAGI is generally your adjusted gross income (AGI), found at line 37 of your federal form 1040, with certain tax preference items like deductions for student loan interest and IRA contributions added back in.
Child Tax Credit. The value (as outlined under § 24(d)(1)(B)(i)) used to determine the amount of refundable credit is $3,000.
American Opportunity Credit. The “supercharged” Hope Scholarship Credit, known as the American Opportunity Tax Credit will be limited to $2,500. Phaseouts apply for the credit beginning with MAGI over $80,000 ($160,000 for married taxpayers filing jointly).
Earned Income Credit (EITC). The EITC numbers for 2013 are as follows:
Personal Exemptions. The personal exemption amount is $3,900. PEP (personal exemption phaseouts) apply.
Standard Deduction Rates. The applicable standard deduction rates for 2013 are $12,200 for married taxpayers filing jointly; $8,950 for head of household; $6,100 for individual taxpayers and $6,100 for married taxpayers filing separate. For purposes of the standard deduction, the amount under §63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,000 OR ($350 + the individual’s earned income). The additional standard deduction amount for the aged or the blind is $1,200; that amount is increased to $1,500 if the taxpayer is single and not a surviving spouse.
Itemized Deductions. The limitations on itemized deductions (the Pease limitations) kick in at $300,000 for married taxpayers filing jointly, $275,000 for head of household, $250,000 for single taxpayers and $150,000 in the case of a married individual filing separately.
Alternative Minimum Tax (AMT). The applicable AMT thresholds for 2013 are $80,800 for married taxpayers filing jointly; $51,900 for individual taxpayers; and $40,400 for married taxpayers filing separate.
The IRS included a few other adjustments at Rev Proc 2013-15. You can read it here if you have interest (downloads as a pdf).
If you’re looking for a more extensive (and general) explanation of the tax changes for 2013, you can find my explanation here. http://www.forbes.com/sites/kell ... we-have-a-tax-deal/.
When you make a nondeductible contribution to a traditional IRA and you immediately convert it to a Roth IRA, 100% of the conversion is nontaxable, right? Not necessarily.
You may be asking yourself, how it could be taxable since you didn't get a tax deduction for the contribution to your IRA. What about the backdoor Roth IRA conversion strategy?
Before I get too far ahead of myself, let me back up and review some basics about taxation of deductible versus nondeductible IRA contributions and taxation of Roth IRA conversions that is relevant to this discussion.
Deductible vs. nondeductible IRA contributions
In 2013, the maximum you can contribute to all of your traditional and Roth IRAs is the lesser of (a) $5,500 or (b) your taxable compensation for the year. If you're 50 or older, the limit is $6,500. You can make contributions to a traditional IRA until age 70-1/2.
Without getting into details, the ability to take a deduction for part or all of a contribution to a traditional IRA is dependent upon three things:
•Whether you're covered by a retirement plan at work
•Tax filing status
•Amount of modified adjusted gross income ("MAGI")
If you're single and not covered by a retirement plan or if you're married and neither one of you is a participant in a retirement plan, then 100% of your contribution up to the limit is deductible. If this isn't the case, then the amount of your IRA deduction is dependent upon your MAGI and tax filing status.
Taxation of IRA distributions that include nondeductible IRA contributions
What happens when you eventually take distributions from your traditional IRA account that includes nondeductible IRA contributions? The good news is that your nondeductible contributions won't be taxed. All of your earnings, on the other hand will be included in ordinary income. This could be a significant amount assuming that you make nondeductible contributions over many years.
The calculation of the taxable portion of distributions from a traditional IRA account that includes deductible and nondeductible contributions isn't simple. It takes into consideration the cumulative amount of previously-unused nondeductible contributions, or "basis," as a percentage of the previous end-of-the-year value of all of your traditional IRA accounts to determine the taxable amount of distributions in a particular year.
Roth IRA conversion
Getting back to the fact that all earnings on deductible and nondeductible traditional IRA contributions will eventually be taxable, is there a way to minimize the damage? The answer is yes, through a Roth IRA conversion. You can transfer, or convert, part, or all of your traditional IRA to one or more Roth IRA accounts. This will eliminate taxation of distributions from your Roth IRA accounts down the road, including all earnings from the date of conversion, provided you comply with certain rules.
The trade off for obtaining this favorable result is taxation of the value of the transfer amount from your traditional to Roth IRA on the date of conversion. The conversion is treated as a withdrawal from your traditional IRA, except that the 10% early withdrawal penalty doesn't apply if you're under age 59-1/2.
The simple backdoor Roth IRA conversion strategy
The plot thickens. What if you made nondeductible contributions to the traditional IRA account that you're converting to a Roth IRA? Aren't the nondeductible contributions nontaxable? The answer is "yes," however, only in a limited situation.
Let's suppose that you're 30 years old, you don't have any traditional IRA accounts, you make a maximum contribution of $5,500 to a traditional IRA, you're covered by a retirement plan at work, and your MAGI exceeds the level for receiving a deduction for your contribution. After your nondeductible traditional IRA contribution has been credited to your account, you can immediately do a Roth IRA conversion. Since there are no earnings, 100% of your conversion will be nontaxable. This is referred to as a backdoor Roth IRA conversion.
See “Two Steps to a Nontaxable IRA for High Income Individuals” for an example of the potential power of using this strategy over an extended period.
Don't forget about other traditional IRA accounts
Let's assume in our previous example that you have another traditional IRA account that was rolled over from a 401(k) plan with a value of $100,000. Would 100% of your backdoor Roth IRA conversion still be nontaxable?
The nontaxable amount of your Roth IRA conversion would be equal to your conversion of $5,500 multiplied by a fraction equal to your nondeductible contribution of $5,500 divided by the total value of all of your traditional IRA accounts of $105,500, or 5,500 x $5,500/$105,500, or $287. This results in a taxable amount of $5,213 ($5,500 - $287), or 95% of your conversion amount. Quite a different result compared with the situation where you had no other traditional IRA accounts.
The backdoor Roth IRA conversion is a great strategy for transferring a nondeductible tax-deferred IRA contribution into a tax-free situation provided that (a) you have no other traditional IRA funds, or (b) the value of your other IRA's is less than or equal to the basis in your IRA accounts.. 作者: pp_dream 时间: 2013-7-26 03:17 标题: 回复 35楼pp_dream 的帖子
我同事老早就跟我说了关于IRA and Roth IRA的backdoor。今天问我关于Roth IRA，我说我没开这个账户，被他们讥笑了一番，说早就让你学习了嘛，怎么还没开？
when you have your IRA account and Roth IRA account,
=> once you contribute money (contribution: 5.5K/year) to your IRA account, transfer all the money to your Roth IRA account immediately.
=> later on, you can use your Roth IRA account as your investment account (you can buy ETF, etc.)
Across the country, the average premium for a 27-year-old nonsmoker, regardless of gender, will start at $163 a month for the lowest-cost "bronze" plan; $203 for the "silver" plan, which provides more benefits than bronze; and $240 for the more-comprehensive "gold" plan.
But for some buyers, prices will rise from today's less-comprehensive policies. In Nashville, Tenn., a 27-year-old male nonsmoker could pay as little as $41 a month now for a bare-bones policy, but would pay $114 a month for the lowest-cost bronze option in the new federal health exchanges.
Likewise, the least-expensive bronze policy would rise to $195 a month in Philadelphia for that same 27-year-old, from $73 today. In Cheyenne, Wyo., the lowest-cost option would be $271 a month, up from $82 today.
The benefits are greater for people who previously were rejected for coverage because they were ill, or who were charged higher premiums. They are expected to find better coverage through the exchanges for the first time.
别忘了，ObamaCare中， the plan provided by insurance companies mostly have deductibles！
My understanding is from last September to December 31, 2014.
I moved to US at the end of 2011. In 2012 tax season, I claimed my US income since I can get refund. At the same time, I claimed tax in Canada for the whole year 2011. 作者: vivian_wmy 时间: 2015-3-25 23:25
谢谢PP啊，这样我也不用忙乎了 作者: pp_dream 时间: 2015-3-26 01:10
My laptop doesn't have Chinese typing software installed, I have to type in English. Not convenient 作者: pp_dream 时间: 2015-3-26 01:14 标题: 回复 85楼vivian_wmy 的帖子
I think the first year with staying less than 6 months, is kind of gray period.
You may want to claim taxes just so to setup a record. 作者: vivian_wmy 时间: 2015-3-26 07:10
Short sale是foreclosure悬崖勒马的一步。话说前些年美国房市很火，那时候花了大把银子买房的房主们在经济危机的这两年面临着两个考验：一是收入 减少；二是房价下滑。某些房主一觉醒来，发现自己欠银行的贷款竟然高于房屋目前的市场价，心拔凉拔凉的。而这些房主又面临收入减少的困境---还不出贷 款，下一步就是被银行收回房屋、信用分数跳水、很多年都无法再次贷款买房，惨淡未来立现眼前。于是这些房主选择和银行达成协议：自己主动卖房，所得款全部 归银行，双方各退一步尽量减少经济继续下滑会带来的损失。