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Tax Bracket Changes Alert

By Children’s Home Society of Florida Foundation

Each year the IRS publishes multiple changes in various tax brackets and amounts that are increased to reflect the rate of inflation. In Rev. Proc. 2012-41; 2012-45 IRB 1 (18 Oct 2012), the IRS released the inflation-adjusted items for 2013.

There were moderate changes in many items. The following includes some of the more significant income tax adjustments:

1. Kiddie Tax – The exclusion for the Kiddie Tax for 2013 is increased to $1,000. For most children, net unearned income in excess of double the exclusion is taxed at the parent’s rate.

2. Savings Bonds for Higher Education – The phase-out for taxpayers receiving income from United States savings bonds used to pay for qualified higher education expenses will start at $112,050 for joint returns and $74,700 for other returns.

3. Medical Savings Accounts – For self-only coverage, the deductible may range from $2,150 to $3,200 and out-of-pocket expenses may not exceed $4,300. For family coverage, the deductible range is $4,300 to $6,450 and the expense limit is $7,850.

4. Token Benefits for Charitable Gifts – A low-cost item is defined as one that has a value of $10.20 or less. It should include the logo, colors or other identification of the charitable organization. Donors who make gifts in excess of $51 may receive a low-cost item and still qualify for a full deduction. A charity may give an insubstantial benefit to a donor provided that the benefit does not exceed 2% of the value of the gift or a maximum of $102.

Gift and Estate Taxes

There are also several provisions that affect gift and estate taxes:

1. Special Use Valuation – Under Sec. 2032A the qualified property may be reduced in value by up to $1,070,000.

2. Annual Exclusion – The present interest annual exclusion is increased to $14,000 in 2013.

3. Gifts to Non-Citizen Spouse – The applicable limit is $143,000.

4. Reduced Interest on Estate Tax – The installment estate tax “2% portion” for Sec. 6166 is $1,430,000.

Conclusion

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Filed under: Accounting, Taxation | Tagged: Annual Exclusion, Charitable Gifts, Gift and Estate Taxes, IRS, Kiddie Tax, Medical Savings Accounts, tax brackets., Update on Tax Inflation Adjustments in 2013 | 2 Comments »