Accounting News

Friday, October 19, 2012
IRS Releases Inflation Rates

The IRS has released the inflation numbers for 2013. They release numbers annually for many tax items based on inflation. This release does not include the adjustments to the tax tables from inflation and many other credits and deductions. The IRS said that much of the code is scheduled to expire at the end of 2012 and they were waiting to see what action the congress takes before releasing the full updates.

So here are some of the highlights of what was released.

  • The contribution limit for 401(k) plans was increased to $17,500 from this years limit of $17,000. 
  • The limit for the gift tax exclusion increased $1,000 to $14,000. 
  • The rate for unearned income on a child's return has risen to $1,000 from $950. 
  • Foreign earned income that can be excluded is up $2,500 to $97,600.
  • Contributions for traditional IRAs is now $95,000-$115,000 for joint filers and $59,000-$69,000 for individuals.
  • The contribution limit for defined contribution plans is now $51,000.
  • Medical Saving Accounts (MSA) deductable amounts for out of pocket expenses is up to $4,300 for individuals and $7,850 for families.
But there is a big hole because we don't know:
  • The tax rate tables
  • Standard deduction amount
  • Limit on itemized deductions
  • Personal exemption amount
  • Interest on school loans
  • Credit against estate taxes
  • Child tax credit
  • Earned income credit
So in the end there is still more we don't know than do know. It is still a good time to schedule a consultation with your account. A bit of planning this year can lead to thousands in savings next year. Since there is a strong possibility that tax rates are going to increase next year there are steps you can take to limit your overall tax liability.

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