Tax Law Changes

Tax Law Changes and Your Plan –
Will You be Ready in 2013??

As the media reports every day, the United States is nearing the “fiscal cliff.”  Two major issues present potential impacts that will affect your tax rate and estate in 2013.  The automatic tax increases and automatic spending cuts.  The tax increases refer to the expiration of the Bush-era tax cuts enacted in 2001 and 2003.  These tax increases change the new lowest income tax from 10% to 15% and a new high from 35% to 39.6% as of January 1, 2013.  The spending cuts refer to the general cut in government spending if Congress cannot reach a budget deficit deal by the end of 2012.

In addition to the Bush tax cuts expiring, capital gains, dividends, the gift and estate tax, and the generation-skipping tax exemptions will change significantly in 2013.  The top estate tax rate also increases from 35 percent to 55 percent. The basic exclusion amount – the amount you can own before your estate is subject to estate taxes – will be lowered from the current $5.12 million in 2012 to $1 million in 2013.  This means that for every dollar you own more than the $1 million exemption, up to 55 percent will be subject to federal estate taxes upon your death.

Also set to expire in 2013 are the phase-out of the personal exemption and itemized deductions, as well as the return of the marriage penalty.  This means:

  • If your income exceeds $265,000 for married filers or $175,000 for single filers, your personal exemption ($3,800 for 2012) will be eliminated.
  • For the same households referred to above, up to 80% of taxpayer’s charitable deductions, mortgage interest, state and local income taxes, and real estate taxes will be eliminated.
  • In 2013, a single filer will have a larger standard deduction compared to joint filers whose deduction will be 33% lower; and the tax brackets contract for joint filers at the two lower rates.  This increases taxes paid for married couples compared to the two same people who live together but are not married.

What does this mean for you?

Now is the time to get your “financial house” in order.  It may be time to have your current plans reviewed to make sure they will still meet your needs in light of the potential changes or to have a plan created that addresses these issues.  Catholic Charities provides a free, confidential service to help in this process.  There is no cost or obligation to talk with someone from our office.  Please contact Laurie Perkins at 918.508.7116 or and we will assist you in setting a meeting or talking with our financial planning advisors.

P.S. – Catholic Charities has been selected to participate in a Planned Giving Challenge Grant program.  This means that for every $5 in planned gifts that Catholic Charities raises (through 12/31/13), we will receive $1 of current operating funding from Tulsa Community Foundation. A gift through your estate would help people in need in perpetuity, but would also provide operating funds to help people in 2014.


Copyright © 2012 The Advancement Group, Inc.
This information has been produced for the benefit of the organizations serviced by The Advancement Group, Inc.