Standard Mileage and Per Diem Rates
The standard mileage rate allowance under the optional method for vehicle expense for 2013 is 56.5 cents per business mile.
The IRS has provided optional per diem allowances for lodging and meals and incidental expenses (M&IE) while traveling for business and away from home. These are calculated using a high-low method based on the locality visited. The 2013 and 2014 daily rate is $242 {low) / $251 (high), respectively, for travel to any “high-cost locality," which includes a $65 / $65 M&IE component and $177 / $186 for lodging.
The 2013 and 2014 daily rate is $163 (low) / $170 {high) respectively, for travel to any "low-cost locality," which includes a $52 / $52 M&IE component and $111 / $118 for lodging. The 2013 and 2014 rates are effective for per diem allowances that are paid to an employee on or after October 1, 2012 or October 1 , 2013, respectively, for travel away from home on or after October 1, 2012 or October 1, 2013 respectively.
The special M&IE rate for the transportation industry is $59 per day in the continental US and $65 per day outside the US.
Health Deduction For Self-Employed
The self-employed health insurance deduction for 2013 is 100%. Effective March 30, 2010, the self-employed health insurance deduction may also be claimed by a taxpayer with respect to a child who has not attained age 27 by the end of the tax year.
In early 2011, the IRS has revised its guidance and reversed its position by stating in the 2010 Form 1040 instructions that "Medicare Part B premiums can be used to figure the deduction.” IRS guidance would suggest that Medicare Part D premiums would also qualify.
Section 179
The section 179 expense election on depreciable property is $500,000 if the asset was placed in service during 2013. However, for SUVs (rated 6,000 to 14,000 pounds gross vehicle weight) the expensed amount is limited to $25,000. Any vehicle with an open cargo area of at least 6 feet in interior length, which is not readily accessible from the passenger compartment (e.g., a pickup truck), is not considered an SUV for expensing purposes.
For tax years beginning in 2012 and 2013, the American Taxpayer Relief Act of 2012 allows $250,000 of the $500,000 total Sec. 179 allowance to be used for new qualified real estate. This new qualified real estate includes qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property.
Bonus Depreciation
For 2013, a taxpayer may expense up to 50% of qualified property placed in service. To qualify for 50% bonus depreciation, the asset must have its original use commence with the taxpayer (i.e. it is new rather than used property), and must have a depreciable life of 20 years or less.
Current law provides that the bonus depreciation provisions [Section 168(k)] expire for property placed in service after 2013.
Work Opportunity Tax Credit
The American Taxpayer Relief Act of 2012 (ATRA) extends the Work Opportunity Tax Credit (WOTC) for hiring certain workers through Dec. 31, 2013. The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC), including adding new categories to the qualified veterans targeted group and expanding the WOTC to make a reduced credit available to tax-exempt organizations for hiring qualified veterans. The VOW Act also extended the WOTC for qualified veterans hired before Jan.1, 2013. The other targeted group categories were not extended by the VOW Act and expired for targeted group members other than qualified veterans hired after Dec.31, 2011. ATRA extends the WOTC for qualified veterans hired before Jan. 1, 2014. ATRA also extends the WOTC for targeted group members, other than qualified veterans, hired after Dec.31, 2011, and before Jan.1, 2014.
Small Business Health Care Tax Credit
This credit is for small employers, less than 25 full-time equivalent workers (FTE), who cover at least 50% of the cost of health care coverage for some of their workers based on the single rate. The employer must pay average annual wages below $50,000 per FTE worker. This credit is worth up to 35% of a small business' premium costs in 2013. On January 1, 2014 this rate increases to 50%.
Monthly Payroll Deposit Threshold
Effective January 1, 2011, taxpayers can no longer use federal tax deposit coupons through their banks. Tax liability payments must be made through EFTPS and paid online.
If your Form 941 payroll tax liability is under the $2,500 threshold, employers in a return period are not required to make monthly deposits or make the payment online through EFTPS. The amount can be remitted with the Form 941 and the 941-V payment voucher. Also, if your Form 940 tax liability is less than $500, you can make the tax payment with Form 940 and the 940-V payment voucher.
MINNESOTA HIGHLIGHTS
Tax Rates
Individual income tax rates are 5.35%, 7.05%, 7.85% and 9.85%. Minnesota added the 9.85% bracket in 2013. The AMT rate is 6.75%.
Education Tax Credit
Families with children in grades K-12 may qualify for a refundable tax credit of up to $1,000 per child for educational expenses paid during the year. The income and credit limits are based on the number of qualifying children. For families with 1 or 2 children, household income must be below $37,500. For families with more than 2 children, the income limit increases by $2,000 per child.
Subtraction for School Expenses
You may subtract a maximum of $1,625 per qualifying child (K-6) and $2,500 (grades 7-12) for qualifying expenses. There is no family maximum deduction. The term "qualifying child" is the same as the federal definition of a qualifying child for Earned Income Credit purposes. This will allow a custodial parent who makes educational expenditures for his or her child to claim the subtraction even if the non-custodial parent claims the child as a dependent.
Minnesota Working Family Credit
Families that qualify for the federal earned income credit also qualify for the Minnesota Working Family Credit. Schedule M1WFC must be completed to determine the amount of the credit.
Marriage Credit
The marriage credit for 2013 provides married taxpayers who each have at least $21,000 of earned income, a credit against the Minnesota regular tax. The credit ranges from $12 to a maximum of $370.
Charitable Deductions
Individuals who do not itemize on their federal income tax return are allowed to subtract contributions that would be charitable deductions under the IRS code. Up to 50% of the total contributions for the year in excess of $500 can be subtracted.
Military Personnel
Minnesota residents, on active duty, stationed outside of Minnesota are no longer considered nonresidents for income tax purposes. You are now allowed a subtraction for military pay.
A Minnesota resident who served in a combat zone or qualifying hazardous duty area at any time from January 1, 2010 through December 31, 2013 may be eligible for a refundable credit. The credit for 2013 equals $120 for each month or part month served in a combat zone for taxpayers whose military records indicate Minnesota as their home of record.
Effective January 1, 2013 - If you (and your spouse if filing a joint return) are a veteran of the military (including the National Guard and Reserves), you may qualify for a nonrefundable credit reducing your income by as much as $750 for past service. You can qualify for this credit if you have been separated from service and meet one or more of the following conditions:
· You served in the military for at least 20 years;
· You have a service-related disability rated by the U.S. Department of Veterans' Affairs as being 100 percent total and permanent; or
· You were honorably discharged and receive a pension or other retirement pay for service in the military.
Veterans with income of more than $37,500 are not eligible for the credit.
Federal Update Legislation
The American Taxpayer Relief Act of 2012 extended a number of federal tax provisions that had or otherwise would have expired. The 2013 Minnesota Omnibus Tax Bill included provisions that conform to ATRA only for tax year 2012 and not for 2013 or beyond.
As a result, the federal provisions extended by ATRA have expired for Minnesota tax purposes. This nonconformity causes a number of differences between Minnesota and federal tax laws. They include:
· Differences in Income Items
· Differences in Above-the-Line Deductions
· Differences in Itemized Deductions
· Differences in Standard Deductions and Personal Exemptions
· Differences in Credits
For a complete list of changes, log onto http://www.revenue.state.mn.us and look under-Individual Income Tax- What's New.
Minnesota continues to require an 80 percent add back for bonus depreciation and section 179 expensing of business property. For 2013, Minnesota allows $25,000 of section 179.
Same Sex Marriage - Income Tax
On Aug. 29, 2013, the Internal Revenue Service issued Revenue Ruling 2013-17. This ruling concerns same-sex marriages and how they affect the filing of federal income tax returns. According to the IRS, individuals who are lawfully married under state law should file their federal tax return as married.
Minnesota legalized same-sex marriages as of Aug. 1, 2013. Now, with the IRS ruling, same-sex married couples in Minnesota will be treated the same under state and federal tax laws. Taxpayers who file their federal return as married should do the same for Minnesota.
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