Saturday, February 9, 2013

2013 tax code cheat sheet

2013 tax code cheat sheet


6 key tax changes to consider now


February 08, 2013|Eva Rosenberg, MarketWatch



In January, Congress passed the American Taxpayer Relief Act of 2012 (ATRA). Many provisions in the fiscal-cliff legislation were stopgaps until Congress could wrangle its way through the budget — and might go away soon. (To see how that works, watch Spielberg’s Lincoln — or C-Span.) That said, several tax provisions became permanent parts of the law, and the Internal Revenue Service is rushing to write proposed procedures to implement the law — and to simplify your filing burdens.
Let’s look at some of the tax provisions that could impact your life this year, and some of the proposals you still have a say in. One person with rational suggestions can make a difference.
Use it or lose it
1. Non-Business Energy Credit (Form 5695). This credit, which used to be much higher in the early Obama years, was extended through 2013. For 2012 and 2013, you are entitled to a lifetime (2005-13) credit of up to $500 for home improvements (roofs, windows, insulation) that meet the definition and standards. Before filing your tax return, get paperwork from the contractor or equipment manufacturer to prove that your improvements are qualified for the credit. Read what happens when you don’t get the paperwork.


2. Cancellation of debt (COD) on personal residence. According to RealtyTrac, 1,836,634 homes were foreclosed in 2012. But these former homeowners will also be getting 1099-C forms, reporting that they were relieved of their mortgage debt. Generally, debt relief is taxable. Under the Mortgage Debt Relief Act of 2007, you can avoid the taxes if your mortgage is or was qualified acquisition debt (your original mortgage, or a refinance for no more than the original mortgage, or a loan used to pay for improvements to the home). The benefits of this law were extended to Dec. 31, 2013.
So if you’ve been thinking about getting out of a property whose mortgage is higher than the value, it’s time to stop procrastinating. It takes months to deal with short sales, deeds in lieu of foreclosure — or even foreclosure. You need to settle the title transfer and loan issue this year to avoid that great big COD bill.
Incidentally, if you are getting a 1099-C for cancelled credit-card debt or other kinds of debt, there may be another way to help avoid taxes on that income: the insolvency exclusion.
3. Qualified Small Business Stock (QSBS). Originally, the Small Business Jobs Act of 2010 allowed for 100% exclusion on certain profits from the sale of QSBS, if it was purchased after Sept. 27, 2010, and before Jan. 1, 2011. That means investors buying such stock in 2012 had to follow the old rules. You could only exclude 50% of the profits.
Good news: The American Taxpayer Relief Act of 2012 extends this 100% exclusion of the gain to Dec. 31, 2013. You can still go out and help support new start-ups, or fund your own. ATRA makes this law retroactive to Jan. 1, 2012. So QSBS stock you bought last year still gets this benefit.

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