Now that the Senate and House have done some work to address the fiscal cliff, we know the future for the estate and gift tax. The 2012 exclusion amount of $5.12 million is now set to remain in place. The tax rate on estates in excess of that amount is now 40% (up from 35%). The article linked below explains the revised statutes in detail.
The IRS released Revenue Procedure 2012-41 last week, announcing the inflation-adjusted amounts for a wide range of items for calendar year 2013.
Of particular note are the minimum and maximum deductible amounts and maximum out-of-pocket amount for high deductible health plans for individuals who maintain a Medical Savings Plan. For self-only coverage, the deductible cannot be lower than $2,150 and cannot be higher than $3,200; the maximum out-of-pocket expenses to be paid is $4,300. For family coverage, which is any coverage other than self-only, the deductible cannot be lower than $4,300 and cannot be higher than $6,450; the maximum out-of-pocket expenses to be paid is $7,850.
The annual gift tax exclusion for 2013 is increasing to $14,000.
The IRS also issued a news release last week announcing 2013 pension plan contribution limits.
- 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 $17,000 to $17,500.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
- The limit on annual contributions to an IRA rises to $5,500, up from $5,000 in prior years.
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes between $59,000 and $69,000, up from $58,000 and $68,000 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 $95,000 to $115,000, up from $92,000 to $112,000. 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 $178,000 and $188,000, up from $173,000 and $183,000.
- The adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
The 2013 inflation adjusted amounts for Health Savings Accounts was previously issued in Revenue Procedure 2012-26. For 2013, the annual contribution limit for an individual with self-only coverage is $3,250; the limit for an individual with family coverage is $6,450. The catch-up contribution for individuals age 55 or over remains unchanged at $1,000. To be an eligible individual for 2013, the high deductible health plan must have a minimum deductible of $1,250 for self-only coverage and $2,500 for family coverage. Additionally, the annual out-of-pocket expenses cannot exceed $6,250 for self-only coverage and $12,500 for family coverage.
There is one speck of good news on the tax horizon. With the looming fiscal cliff, and an expected increase in estate taxes, the amount excludable for gifts is increasing.
Currently, a gift up to $13,000 is excludable, both to the donor and the donee. In 2013, that amount is set to rise to $14,000. These amounts are annual. Therefore, this amount can be gifted to a single person every year.