While Seattle and Denver prepare to do battle in New Jersey’s hosted Super Bowl on February 2, most Americans will need to prepare to do battle with the IRS starting January 31, the official opening of tax season.
This year, that means making yourself aware of some key IRS Tax Law changes. Here are some of the most important changes that will affect most American taxpayers this tax season:
Tax brackets: Taxpayers are looking at seven new tax brackets — at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
Standard deductions: Standard filing deductions increased to $12,200 for taxpayers married filing jointly; $8,950 for taxpayers filing as head of household; and $6,100 for single taxpayers.
New exemption levels: Congress has hiked the personal exemption amount to $3,900.
Estate taxes: There’s now an estate tax rate of 40%, along with an estate tax exemption of $5.25 million.
Contributions to 401(k) plans: Workers can contribute up to $17,500 per year to their 401(k) plans.
IRA plans: Americans saving for retirement can contribute $5,500 to their individual retirement plans, or $6,500 for Americans age 50 and over.
Mileage deductions: According to the IRS, mileage rates for business and medical increased to $0.565 and $0.24 respectively. Note the mileage rate for charity mileage still stands at $0.14.
Get your tax records organized now. January is the best month to organize your financial documents, especially now that the final bills for 2013 have rolled in. This will save time when you need it most. You wouldn’t want to miss out on valuable deductions because you’re scrambling around at the last minute, would you?