The 2013 standard mileage rates for use of an automobile are 56.5¢ per mile for business miles driven (an increase of 1¢ from 2012), and 24¢ per mile for medical or moving purposes (up 1¢ from 2012). The rate for rendering gratuitous services to a charitable organization remains unchanged at 14¢ per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving expenses is based on variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rate.

A taxpayer may not use the business standard mileage rate for any vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or claiming a Section 179 deduction for that vehicle, or for more than four vehicles used simultaneously.

Social Security and Medicare Update

The annual inflation adjustments have been made for the various social security amounts and thresholds. So, we thought it would be a good time to update you for 2013.

The social security wage base, for computing the social security tax (OASDI only), increases to $113,700 in 2013, up from $110,100 for 2012. The additional $3,600 for 2013 represents an increase of 3.3% in the wage base. There is no taxable earnings limit for Medicare (HI only) contributions.

New for 2013, the 0.9% Medicare Surtax is imposed on wages and self-employment (SE) income in excess of the following modified adjusted gross income (MAGI) threshold amounts: $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for all other taxpayers. The employer portion of the tax is not increased. This new tax is a provision of the Patient Protection and Affordable Care Act.

For social security beneficiaries under the full retirement age, the annual exempt amount increases to $15,120 in 2013 up from $14,640 in 2012. These beneficiaries will be subject to a $1 reduction in benefits for each $2 they earn in excess of $15,120 in 2013. However, in the year beneficiaries reach their full retirement age, earnings above a different annual exemption amount ($40,080 in 2013, up from $38,880 in 2012) are subject to $1 reduction in benefits for each $3 earned over this exempt amount. Social security benefits are not reduced by earned income beginning with the month the beneficiary reaches full benefit retirement age. But remember, social security benefits received may be subject to federal income tax.

Individuals may have to pay federal income taxes on up to 85% of their benefits. Inclusion within taxable income can occur if you have substantial income from wages, self-employment, interest, dividends, and other taxable income, in addition to your benefits. However, no one pays federal income tax on more than 85% of his or her benefits.

The Social Security Administration estimates the average retired worker will receive $1,261 monthly in 2013. The average monthly benefit for an aged couple where both are receiving monthly benefits is $2,048. These amounts reflect a 1.7% cost of living adjustment (COLA).

The maximum 2013 social security benefit for a worker retiring at full retirement age is $2,533 per month, up from $2,513 in 2012.