For tax year 2013, the United States Internal Revenue Service (IRS) has announced the annual inflation adjustments for more than two dozen tax provisions, as well as the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items.
For example, the annual exclusion for gifts rises to USD14,000 for 2013, up from USD13,000 for 2012, while the amount used to reduce the net unearned income reported on a child’s tax return subject to the ‘kiddie tax’ (which taxes certain unearned income of a child at the parent’s marginal rate) is USD1,000, up from USD950 for 2012. The foreign earned income exclusion rises to USD97,600, up from USD95,100 this year.
Similarly, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. On the other hand, other limitations will remain unchanged because, in their case, the increase in the index did not meet the statutory thresholds that trigger their adjustment.
The highlights of those changes include that the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from USD17,000 to USD17,500, while the catch-up contribution limit for employees aged 50 and over who participate in the same plans remains unchanged at USD5,500.
Furthermore, the deduction for taxpayers making contributions to a traditional individual retirement account (IRA) is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between USD59,000 and USD69,000, up from USD58,000 and USD68,000 in 2012.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is USD95,000 to USD115,000, up from USD92,000 to USD112,000 this year. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between USD178,000 and USD188,000, up from USD173,000 and USD183,000..
TAGS: individuals | tax | pensions | employees | retirement | tax authority | gift tax | United States | tax breaks | inflation | individual income tax
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