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IRS Announces 2013 Inflation Adjustments

Contributor: Diane Giordano, Partner, Tax & Business

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Earlier this week, the IRS issued Revenue Procedure 2013-15, which includes the annual inflation adjustments for tax year 2013. The announcement includes the tax rate changes from the recently passed American Taxpayer Relief Act of 2012.

Highlight of items which may be the greatest interest to taxpayers include:

STANDARD DEDUCTIONS
The 2013 standard deductions available to taxpayers who do not itemize are as follows:

  • $12,200 (up $300) for joint filers
  • $6,100 (up $150) for single filers or married taxpayers filing separately
  • $8,950 (up $250) for heads of household
  • $1,200 (up $50) for the additional standard deduction for the aged/blind ($1,500 for single or head of household)

PERSONAL EXEMPTION
The 2013 personal exemption taxpayers may claim for themselves and dependents is increased to $3,900 (up $100). Beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)

TAX BRACKETS

RateSingle FilerHead of HouseholdJoint FilerMarried Filing Separately
10%$0 - $8,925 $0 - $12,750$0 - $17,850 $0 - $8,925
15%$8,926 - $36,250$12,751 - $48,600$17,851 - $72,500 $8,926 - $36,250
25%$36,251 - $87,850$48,601 - $125,450$72,501 - $146,400 $36,251 - $73,200
28%$87,851 - $183,250$125,451 - $203,150$146,401 - $223,050 $73,201 - $111,525
33%$183,251 - $398,350$203,151 - $398,350$223,051 - $398,350$111,526 - $199,175
35%$398,350 - $400,000$398,350 - $425,000$398,351 - $450,000$199,175 - $225,000
39.6%Morethan $400,000Morethan $425,000Morethan $450,000Morethan $225,000

TRANSPORTATION FRINGE BENEFIT
The 2013 income exclusions for employer-provided transportation benefits is $245.

ITEMIZED DEDUCTION PHASE OUT
The Itemized Adjustment Phaseout, also known as the “Pease” phaseout of itemized deductions and the personal exemption phaseout (PEP) return in 2013 and will begin at the following thresholds:

  • $150,000 for married filing separately
  • $250,000 for single filers
  • $275,000 for heads of household
  • $300,000 for joint filers
ESTATE AND GIFT TAX EXEMPTION
The unified credit rises from $5.12 million in 2012 to $5.25 million in 2013. The annual gift tax exclusion will increase to $14,000 in 2013. This will be the first increase since 2009.

RETIREMENT PLAN ADJUSTMENTS
The 2013 elective contribution limits on Section 401(k), Section 403(b) plans and similar plans are $17,500 and $5,500 for catch-up contributions for those 50 and older.

The 2013 phaseout ranges for the deductibility of IRA contributions are:

  • $59,000 to $69,000 (up $1,000) for single and head-of-household filers covered by workplace plans,
  • $95,000 to $115,000 (up $3,000) for joint filers when a contributing spouse is covered by a workplace plan, and
  • $178,000 to $188,000 (up $5,000) for joint filers when the contributor’s spouse is covered by a work plan.
The phaseouts for contributing to a Roth IRA in 2013 are:
  • $178,000 to $188,000 (up $5,000) for joint filers, and
  • $112,000 to $127,000 (up $2,000) for single and head-of-household filers.
The annual benefit limit under a defined benefit plan will increase to $205,000. The limit for defined contribution plans will increase to $51,000.

ALTERNATIVE MINIMUM TAX
The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly.) The American Taxpayer Relief Act of 2012 provided for future amounts to be indexed for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

 
Contributor
Diane Giordano

Partner
Tax & Business
Melville, NY
 
 
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