WASHINGTON (AP) — Higher-income Americans and some legally married same-sex couples are likely to feel the biggest hits from tax law changes when they file their federal returns in the next few months. Taxpayers also will have a harder time taking medical deductions.
In other changes for the 2013 tax year, the Alternative Minimum Tax has been patched — permanently — to prevent more middle-income people from being drawn in, and there's a simpler way to compute the home office deduction.
Tax rate tables and the standard deduction have been adjusted for inflation, as has the maximum contribution to retirement accounts, including 401(k) plans and Individual Retirement Accounts.
The provisions were set by Congress last January as part of legislation to avert the fiscal cliff of tax increases and spending cuts. "We finally got some certainty for this year," said Greg Rosica, a contributing author to Ernst & Young's "EY Tax Guide 2014."
Nevertheless, the filing season is being delayed because of the two-week government shutdown last October. The Internal Revenue Service says it needs the extra time to ensure that systems are in place and working. People will be able to start filing returns Jan. 31, a week and a half later than the original Jan. 21.
"People who are used to filing early in order to get a quick refund are just going to have to wait," said Barbara Weltman, a contributing editor to "J.K. Lasser's Your Income Tax 2014."
No change in the April 15 deadline, however. That's set by law and will remain in place, the IRS says.
The tax legislation passed at the start of 2013 permanently extended the Bush-era tax cuts for most people, but also added a top marginal tax rate of 39.6 percent for those at higher incomes — $400,000 for single filers, $450,000 for married couples filing jointly and $425,000 for heads of household.
On top of that, higher-income taxpayers could see their itemized deductions and personal exemptions phased out and pay higher capital gains taxes — 20 percent for some taxpayers. And there are new taxes for them to help pay for health care reform.
There are different income thresholds for each of these new taxes.
An additional 0.9 percent Medicare tax, for example, kicks in on earnings over $250,000 for married couples filing jointly and $200,000 for singles and heads of household. Same for a 3.8 percent tax on investment income.
But the phase-out of personal exemptions and deductions doesn't begin until $300,000 for married couples filing jointly and $250,000 for singles.
Taxpayers who didn't plan could find themselves with big tax bills come April 15 — and perhaps penalties for under-withholding.
"It's a snowball effect," said Dave Du Val, TaxAudit.com's vice president of customer advocacy.
"The complexities of the tax code are only affecting those of us trying to read it," National Taxpayer Advocate Nina Olson said in an interview. Tax software makes a lot of those complexities invisible to most people.
As a result, taxpayers might not realize they're being helped by a wide array of deductions and credits. "They have no idea of the benefits they are getting through the tax code," she said.
One simplification: Many investors will find it easier to report stock sales if the 1099-B forms they receive contain key details of the sale and the correct basis for computing gains and losses.
The IRS processed more than 147 million tax returns in 2013, down slightly from the previous year. More than 109 million taxpayers received refunds that averaged $2,744, also slightly less than in 2012.
The upward trend of electronic filing continued, with more than 83 percent of returns being filed online. The biggest jump, 4.6 percent, was among people who used software programs to do their own taxes.
The IRS is continuing to offer its Free File option, which is available to taxpayers with adjusted gross incomes of $58,000 or less. These taxpayers can use brand-name software to file their taxes at no cost. Some states also participate. The agency also has an option for taxpayers of all incomes — Free File Fillable Forms — which does basic calculations but does not offer the guidance that a software package would.
For the 2013 tax year, the personal exemption is $3,900. The standard deduction is $12,200 for married taxpayers filing jointly, $6,100 for singles, and $8,950 for heads of household.
Many credits and deductions were extended for 2013, including several for education. Among them: the American Opportunity Credit of up to $2,500 per student for tuition and fees and deductions for student loan interest and tuition-related expenses. Many of these are phased out at higher income levels.