Here Are a Few of The Many Tax Law Changes For 2013....| Tax Tip of the Week | No. 173

IRS Announces Inflation Adjustments for 2013

Every year the IRS automatically adjusts certain tax rules based upon current inflation levels.  The following are a few of the significant changes: -The gift tax annual exclusion will increase from $13,000 to $14,000.  This means a married couple could gift up to $28,000 to an individual before a gift tax return would need to be filed. -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 other rules of filing a “Kiddie Tax” return remain the same- a return must be filed if the child has more than $1,900 of investment income and is under age 18 (or age 19-23 if a full time college student). -The foreign earned income exclusion increases from $95,100 to $97,600. -The maximum contribution to 401(k) and other defined contribution saving plans is now $17,500/year ($17,000 was the maximum in 2012).  The catch-up contribution limit for those age 50 and over remains unchanged at $5,500. -There are over 20 other changes that were announced.   For a complete review, see Revenue Procedure 2012-41.  Please note there are many other tax items that typically receive inflation adjustments as well. Those include earning adjustments for the child tax credit, American Opportunity tax credits and Earned Income Credit. Many of these, and other, tax items are scheduled to expire or change at the end of the year.  It appears the IRS is waiting to see what actions Congress takes in its lame-duck session. We will keep you posted!As always, give us a call with any questions you may have.

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Rick Prewitt - the guy behind TTW...until next week.