On Thursday, October 18, the IRS and the Social Security Administration released various inflation adjustments to key limits and exclusions. In a time of uncertainty in the tax code, these new changes are certain because they are indexed for inflation. Here are the important details that you should be aware of for 2013.
The IRS released its annual revenue procedure, detailing inflation adjustments to the gift tax annual exclusion and other important items for tax years beginning in 2013, including:
- The gift tax annual exclusion will increase from $13,000 to $14,000
- 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
The IRS also announced the 2013 contribution limits and other figures for pension plans and other retirement-related items including:
- 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
The Social Security Administration also announced an increase in the Social Security wage base for 2013, to $113,700 up from $110,100 in 2012.
It is also important to note that other items will be announced in a separate guidance from the IRS including:
- Adoption credit
- Child tax credit
- Hope scholarship and lifetime learning credits
- Earned income tax credit
- Overall limitation on itemized deductions
- Qualified transportation fringe benefit
- Adoption-assistance exclusion
- Interest on educational loans
If you have questions about the upcoming inflation increases or tax planning in general, don’t hesitate to email us, we’re here to help you.
Author: Dan Monaghan, CPA, Senior Manager
Credit source: Journal of Accountancy