|January 17, 2013|
Previously published on January 14, 2013
The first paycheck of 2013 may have more money taken out than the last paycheck of 2012. Here’s why:
SOCIAL SECURITY TAX
For the past two years, employees received a break on the amount they were paying into Social Security, which was reduced from 6.2% to 4.2% for 2011 and 2012. Congress did not act to extend this payroll tax relief, so most employees will see a reduction in their take-home pay in 2013 as the rate reverts to the original 6.2%. Additionally, the social security taxable wage base will increase to $113,700 for 2013.
MEDICARE TAX INCREASE FOR HIGH EARNERS
Most employees will see no change to their Medicare withholdings. The Medicare rate will remain at a flat 1.45% for 2013. Employees earning over $200,000 will be subject to an additional Medicare tax of 0.9% beginning in 2013. For these individuals, the Medicare tax rate will be 1.45% on wages up to $200,000 and 2.35% for wages exceeding $200,000.
INDIVIDUAL TAX RATE CHANGES
Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6% has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates - 10, 15, 25, 28, 33 and 35% - remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.