Payroll Tax Increase- Beginning in 2013, the social security payroll tax reverts back to 6.2 percent. Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted February 22, 2012, workers received larger paychecks for the rest of 2012 based on a lower social security tax withholding rate of 4.2 percent.

Self-employed individuals will revert back to 12.4 percent from the 10.4 percent they paid in 2012.

Retirement Savings Credit - If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans in 2013, you may be able to take a credit of up to $1,000 ($2,000 if filing jointly). The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

  • Single, MFS or qualifying widow(er), with income up to $29,500
  • Head of Household with income up to $44,250
  • Married Filing Jointly, with incomes up to $59,000

American Opportunity Education Credit - The AOEC has been extended until 2017 for qualifying taxpayers.  The Hope Credit has been enhanced and renamed the American Opportunity Tax Credit. The maximum credit is $2,500 per eligible student and in addition to tuition and fees/expenses required for enrollment or attendance, required course materials qualify for the credit even if not purchased from the educational institution as a condition of enrollment or attendance.  The credit is enhanced with a refundable feature:  40% of the credit, up to $1,000, is generally refundable, meaning it is allowed even if it exceeds your tax liability.

Year-End Expense Deductions – For cash-basis taxpayers, if you are planning to deduct year-end expenditures as either business expenses or itemized deductions in 2013, be sure to mail your check by December 31.  If a credit card is used to pay the expense, it is deductible when charged to your card, not when the credit card bill is paid.