The IRS has announced its annual cost-of-living and inflation adjustments for 2013 but did not include key items such as the 2013 tax brackets, personal exemption or standard deduction.

Tax laws require the IRS to adjust the dollar amounts of dozens of tax provisions each year to account for inflation, but the IRS said it is waiting to address many items that are scheduled to change or expire in 2013, including:

  • ordinary income tax brackets,
  • standard deduction,
  • personal exemption,
  • education credits,
  • Section 179 expensing limits,
  • adoption assistance exclusion,
  • child tax credit and earned income tax credit,
  • transportation fringe benefit,
  • estate and gift tax unified lifetime exemption, and
  • phaseouts of personal exemptions and itemized deductions, which are scheduled to return in 2013.

The IRS similarly waited to adjust many items in 2010, when the 2001 and 2003 tax cuts were originally scheduled to expire.

The changes the IRS has made for 2013 were announced in a pair of releases, one with cost-of-living adjustments for pension and retirement plan limits (IR-2012-77), and another with inflation adjustments for other items in the code (Rev. Proc. 2012-41).

Key 2013 inflation adjustments in Rev. Proc. 2011-52:

  • Kiddie tax — The "kiddie" tax thresholds are increasing by $50 in 2013. The kiddie tax in 2013 will generally apply the following tax treatment to unearned income of a child under 18 (24 if the child is a student):
    •  First $1,000 not subject to tax
    • Next $1,000 taxed at child's marginal rate
    • $2,000+ taxed at parent's marginal rate
  • Gift tax exclusion — The annual gift tax exclusion will increase to $14,000 in 2013 — the first increase since 2009, when the exclusion rose from $12,000 to $13,000.
  • Expatriation — The average annual net income tax for determining whether a taxpayer is a covered expatriate in 2013 is increased by $4,000, to $155,000. The amount excludable from "gross income" for purposes of calculating the "exit tax" in 2013 is increased by $17,000, to $668,000.
  • Foreign income exclusion — The foreign earned income exclusion in 2013 is increasing by $2,500, to $97,600.

Key retirement plan adjustments under IR-2012-77:

  • Qualified retirement plans — The 2013 contribution limits on Section 401(k) and Section 403(b) plans (and similar plans limited under Section 401(g)(1)) are increasing by $500, to $17,500, with the $5,500 for catch-up contributions for those 50 and older unchanged.
    adoption assistance exclusion,
  • Traditional IRA limits — The 2013 phaseout ranges for the deductibility of IRA contributions are:
    • $59,000 to $69,000 (up $1,000) for single and head-of-household filers covered by workplace plans,
    • $95,000 to $115,000 (up $3,000) for joint filers when a contributing spouse is covered by a workplace plan, and
    • $178,000 to $188,000 (up $5,000) for joint filers when the contributor's spouse is covered by a work plan.
  • Roth IRA income limits — The phaseouts for contributing to a Roth IRA in 2013 are $178,000 to $188,000 (up $5,000) for joint filers, and $112,000 to $127,000 (up $2,000) for single and head-of-household filers.
  • Pension plans — The 2013 annual benefit limit under a defined benefit plan under Section 415(b)(1)(A) is increased by $5,000, to $205,000. The limit for defined contribution plans under Section 415(c)(1)(A) is increasing by $1,000, to $51,000.

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