IRS announces inflation adjustments for 2013

BY SALLY P. SCHREIBER, J.D.

On Thursday, the IRS released its annual revenue procedure making inflation adjustments to the gift tax annual exclusion and other items for tax years beginning in 2013 (Rev. Proc. 2012-41).

The gift tax annual exclusion will increase from $13,000 to $14,000 in 2013 and the amount of foreign earned income that taxpayers can exclude increases from $95,100 to $97,600. The amount used to reduce the net unearned income reported on a child’s tax return to calculate the kiddie tax increases from $950 to $1,000. Other inflation-adjusted amounts include the alternative minimum tax exemption for the kiddie tax, the private activity bond volume cap, the limitation on eligible long-term care premiums, high-deductible health plan definitions, the threshold for required reporting of receipt of large gifts from foreign persons, and 20 other provisions.

Rev. Proc. 2012-41 does not include the inflation adjustments for the tax tables, the Sec. 23 adoption credit, the Sec. 24 child tax credit, the Sec. 25A Hope scholarship and lifetime learning credits, the Sec. 32 earned income tax credit, the standard deduction, the Sec. 68 overall limitation on itemized deductions, the Sec. 132(f) qualified transportation fringe benefit, the Sec. 137 adoption-assistance exclusion, the Sec. 151 personal exemption, the Sec. 179 election, the Sec. 221 interest on education loans, and the unified estate credit, all of which will be addressed in separate guidance, the IRS said. Many of these items are scheduled to expire or change at the end of the year, and the IRS may be waiting to see what actions Congress takes in its lame-duck session.

The IRS also announced the 2013 contribution limits and other figures for pension plans and other retirement-related items (IR-2012-77). The elective deferral (contribution) limit for employees who participate in Sec. 401(k), 403(b), or 457(b) plans and the federal government’s Thrift Savings Plan increases from $17,000 to $17,500. The catch-up contribution limit under those plans for those age 50 and over is unchanged at $5,500.

On Tuesday, the Social Security Administration announced that the Social Security wage base for 2013 will be $113,700 (up from $110,100 in 2012).

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

Get the career toolkit

Download this sponsored report for four must-read articles showcasing tips and best practices for employers and employees.

DOWNLOAD

Filing season quick guide — Tax year 2014

Tax season started Jan. 20. Download our “quick guide,” a printable card that contains dollar thresholds, tax tables, standard amounts, credits, and deductions to keep at your fingertips during tax season.

TAX NEWS

Expired tax provisions extended for 2014

President Barack Obama signed legislation that retroactively extended more than 50 expired tax provisions for 2014, allowing taxpayers to take advantage of a host of tax incentives during this filing season.