By now, your 2013 W-2 and 1099 forms have arrived in your inbox or mailbox. Now come the inevitable questions about changes or updates to federal tax laws that may affect your 2013 personal tax returns.

Here’s what you need to know about key 2013 tax law changes.

1. Higher Rates for High-Income Individuals

Most individuals will pay the same federal income tax rates for 2013 as they did for 2012 (10, 15, 25, 28, 33 and 35 percent). The American Taxpayer Relief Act (ATRA) raised the maximum federal rate for 2013 for high–income earners to 39.6 percent (up from 35 percent). The 39.6 percent rate affects single taxpayers with taxable income over $400,000, married taxpayers filing jointly with income over $450,000 and taxpayers filing as head of household with income over $425,000.

2. Higher Capital Gains Rates and New Tax

Most individuals will pay the same federal income tax rates on long-term capital gains and dividends as in 2012, but for those with higher incomes, the ATRA raised the maximum rate for 2013 to 20 percent (up from 15 percent). The 20 percent rate affects single taxpayers with taxable income over $400,000, married taxpayers filing jointly with income over $450,000 and taxpayers filing head of household with income over $425,000.

High-income taxpayers will pay a new 3.8 percent Medicare contribution tax on all or part of net investment income, including long-term capital gains and dividends. In other words, the maximum federal rate on long-term gains and dividends for 2013 is 23.8 percent (20 percent capital gains tax plus 3.8 percent Net Investment Income Tax). This is way up from a maximum rate of 15 percent in 2012.

The new 3.8 percent Net Investment Income Tax (or NIIT) can also hit other types of income too, such as short-term capital gains, interest, rental income, royalties, income and gains from passive investments in partnerships, limited liability companies and S corporation, and taxable portion of gains from selling personal residences.

You will pay the NIIT if your adjusted gross income (AGI) exceeds $200,000 if you are unmarried, or if it exceeds $250,000 if you are a married couple filing jointly..

3. Additional Medicare Tax on Wages and Self-Employment Income

A 0.9 percent Additional Medicare Tax is charged on salary and self-employment income above $200,000 for an unmarried individual or combined salary and self-employment income above $250,000 for a married couple filing jointly. If you are self-employed, the 0.9 percent Additional Medicare Tax is owed as part of your self-employment tax bill.

4. Personal and Dependent Exemption Phase-out

A personal and dependent exemption phase-out rule is on the books for 2013. This may significantly lower or completely eliminate your personal and dependent exemption write-offs. In 2013, exemptions begin to phase out at the following adjusted gross income (AGI) thresholds: $250,000 for single taxpayers, $300,000 for married taxpayers filing jointly, and $275,000 for taxpayers filing as head of household.

5. Itemized Deduction Phase-out

The itemized deduction phase-out can significantly reduce your deduction for home mortgage interest, state and local income and property taxes, charitable donations, and miscellaneous itemized deduction items, such as investment expenses and fees for tax advice and preparation.

The itemized deduction phase-out starts at the following AGI thresholds: $250,000 for single taxpayers, $300,000 for married taxpayers filing jointly, and $275,000 for taxpayers filing as head of household. Your affected itemized deductions are reduced by 3 percent of the amount by which your AGI exceeds the applicable threshold; however, the reduction cannot exceed 80 percent of the total affected deductions with which you began.

6. A Higher Threshold for 2013 Medical Deductions

You can claim an itemized deduction for medical expenses paid for you, your spouse, and your dependents, to the extent the expenses exceeded 10 percent of AGI (up from 7.5%). But if either you or your spouse was age 65 or older as of December 31, 2013, the new higher AGI threshold will not affect you until 2017.

As always, please check with your tax advisor for the tax guidance that best fits with your tax needs and goals.

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The information contained in the Knowledge Center is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will CST or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Knowledge Center or for any consequential, special or similar damages, even if advised of the possibility of such damages.