Deductions reduced for those with higher incomes

As you start your 2013 tax planning, you may have to

deal with the loss of certain deductions you've become

used to taking.

PERSONAL EXEMPTIONS. A previous tax rule based on

adjusted gross income (AGI) has been reinstated for

2013: the phase-out of the deduction for personal

exemptions. Your deduction for yourself, your spouse,

and your dependents (each worth $3,900) will be reduced

if you're married, filing a joint return and your AGI

is greater than $300,000. For singles the threshold

amount is $250,000.

For every $2,500 of AGI over the threshold amount,

exemptions are reduced by 2%; at $422,500 for joint

filers, the exemptions are completely phased out.

ITEMIZED DEDUCTIONS. Itemized deductions for higher-

income taxpayers will again be limited in 2013. They

will be reduced by 3% of that portion of AGI exceeding

the thresholds mentioned above ($250,000 for singles

and $300,000 for couples). The amount of your itemized

deductions won't be phased out completely, however.

They can't be reduced by more than 80%, and certain

deductions are not affected (medical expenses,

investment interest, theft and casualty losses,

for example).

With these changes to the tax rules, an early start on

tax planning for 2013 is essential.