On October 18, 2013, the IRS announced various cost-of-living adjustments (COLAs) for qualified retirement plan and other statutory limits in 2013. Although inflation has remained on the low side this year, it was still high enough to move the needle on more than two dozen tax code provisions. Here are some of the highlights:
The annual gift tax exclusion jumps to $14,000 per recipient for 2013 from $13,000 per recipient for 2012.
The annual threshold on unearned income triggering the "kiddie tax" increases to $2,000 for 2013 from $1,900 for 2012.
The foreign earned income exclusion rises to $97,600 for 2013 from $95,100 for 2012.
The elective deferral limit for employees participating in 401(k), 403(b), most 457 plans, and the federal government's thrift savings plan increases to $17,500 for 2012 from $17,000 for 2012. But the limit for "catch-up contributions" to these plans by individuals age fifty or over remains at $5,500. Thus, the combined limit for individuals age fifty or over in 2013 is $23,000, up from $22,500 for 2012.
The limit for additions to defined contribution plans increases to $51,000 in 2013 from $50,000 for 2012.
The limit on the annual benefit under a defined benefit plan increases from $200,000 to $205,000.
The phase-out range for taxpayers who are eligible to deduct traditional IRA contributions increases to between $59,000 and $69,000 of modified adjusted gross income (MAGI) for single filers in 2013, up from between $58,000 and $68,000 for 2012. The phase-out range increases to between $95,000 and $115,000 of MAGI for joint filers in 2013, up from between $92,000 and $112,000 for 2012. For an IRA contributor who is married to an active plan participant, the phase-out range increases to between $178,000 and $188,000 of MAGI for 2013, up from between $173,000 and $183,000 for 2012.
The phase-out range for taxpayers making contributions to a Roth IRA rises to between $112,000 and $127,000 of MAGI for single filers, up from a between $110,000 and $125,000 for 2012. The phase-out range for joint filers jumps to between $178,000 and $188,000 of MAGI for 2013, up from between $173,000 and $183,000 for 2012.
Note that some other limits did not change. For instance, the dollar limit used to define "highly compensated employees" (HCEs) for qualified plans is $115,000 for 2013, the same as the limit for HCEs in 2012.
Details on the COLAs highlighted above and other adjustments can be found in Revenue Procedure 2012-41. It will be published in Internal Revenue Bulletin 2012-45 on November 5, 2012.