Inflation Adjustments in Tax Items for 2013
With the new year approaching, we would like to remind our clients and friends of tax-related inflation adjustments that will take effect on January 1, 2013. Some of the more significant changes are listed below. (Note that the following tax items are not covered in this update as they await action by Congress and related IRS guidance: the tax rates, the standard deduction, the personal exemption and expensing of certain depreciable business assets.)
Annual Gift Tax Exclusion. The annual gift tax exclusion for 2013 will be $14,000 (up from $13,000 in 2012). The annual gift tax exclusion for gifts to a spouse who is not a United States citizen will be $143,000 (up from $139,000 in 2012).
Valuation of Qualified Real Property in Decedent’s Gross Estate. For an estate of a decedent dying in 2013, if the executor elects to use the Code Section 2032A special use valuation method for qualified real property, the aggregate decrease in value for estate tax purposes resulting from the election cannot exceed $1,070,000 (up from $1,040,000 in 2012).
Retirement Plan Contribution Limits. The 2013 contribution limit for 401(k), 403(b) and 457 plans will be $17,500 (up from $17,000), but the additional catch-up contribution limit for these plans for taxpayers who are age 50 or older will remain unchanged at $5,500. The maximum contribution to IRAs will be $5,500 (up from $5,000 in prior years).
The deduction for a traditional IRA for singles and heads of household will phase out at adjusted gross income (AGI) between $59,000 and $69,000 (up from $58,000 and $68,000 in 2012). For married couples filing jointly, the income phase-out is between $95,000 and $115,000 (up from $92,000 and $112,000) when the IRA contributor is covered by a workplace retirement plan, and between $178,000 and $188,000 (up from $173,000 and $183,000) when the IRA contributor is not covered at work but is married to someone who is.
For Roth IRA, the phase-out income is between $178,000 and $188,000 for married couples filing jointly (up from $173,000 and $183,000 in 2012). For singles and heads of household, the income phase-out is between $112,000 and $127,000 (up from $110,000 and $125,000). For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range remains $0 to $10,000.
