FPO TAX ALERT: 2013 tax cutoff amounts unclear whether AGI or taxable income

Though there has been compromise for both the House and Senate on the Bush Era tax cutoff levels, there remains confusion of what the subject amounts refer to.  For 2013, those earning above $400k ($450k if married filing jointly) will no longer be taxed at the lower Bush era tax rates.  This is the agreement as signed by both the House and the Senate.  However, the current congressional language does not specify what this $400k applies to.  Until clarification is provided in could be any of the below:

  • Your earned income
  • All of your income
  • All of your income adjusted for losses and above the line deductions
    • This is called your adjusted gross income (AGI)
  • Your AGI plus adding back in foreign income and eliminating foreign deductions, IRA contribution deductions, student loan deductions, and higher education deductions
    • This is called your modified adjusted gross income (MAGI)
  • Your taxable income

This mostly harms those who in one or more of these categories would have sufficient income as it adds work and difficulty when being forced to plan your tax strategy for multiple possible outcomes in the year that has already begun.

About Steve @ FPO
Hello FPO readers, I have been writing on financial topics for about 12 years now, but I have only recently reignited the fire of publishing online. I have to say, its good to be back. I am an electrical engineer by trade who enjoys all topics engineering and financial. I started Financial Place Online (FPO) to create a value added financial news and education website that would provide a refreshing daily financial read. Financial Place Online websites are built around the principles of consumer empowerment, leveling the playing field, zero spam tolerance, and none of those annoying sidebar or banner ads. For us, it's all about enjoying a good read.

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