IRS 2014 Inflation Adjustments
NOVEMBER 06, 2013

IRS 2014 Inflation Adjustments

By: Jeffrey S. Adler Category: Tax

Another News Brief for your Use

IRS Issues 2014 Inflation Adjustments
  
Cites: Rev.       Proc. 2013-35; 2013-47 IRB 1; IR-2013-86

Scroll to read the full report or click       here to download a printable pdf.

Summary: Each year at this time, the IRS releases cost of living adjustments. For estate planners, the key figures for 2014 are the new transfer tax exemption - which will be $5.34 million, up from $5.25 million. The annual exclusion for 2014 lifetime gifts has not changed-it's still $14,000 for 2014. In addition to the estate and gift tax figures above, there is a new tax rate schedule, and other tax changes as discussed below. We also list some of the 2014 key cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items.

Tax Rates: The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return).

Standard Deduction: The standard deduction:$6,200 for singles and married persons filing separate returns, $12,400 for married couples filing jointly, $9,100 for heads of household.

Itemized Deduction Limitation: The limitation for itemized deductions for individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).

Personal Exemption: The personal exemption will be $3,950 - subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly) and phases out completely at $376,700 ($427,550 for married couples filing jointly.)

AMT: The alternative minimum tax (AMT) exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly).

Earned Income Credit: The maximum earned income credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children.

Transfer Tax Exemption: The exemption equivalent of the transfer tax applicable credit amount for lifetime gifts, transfers at death, and lifetime or death time GST transfers for 2014 is increased to $5,340,000.

Annual Gift Tax Exclusion: The gift tax annual exclusion remains at $14,000.

FSA Limits: The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.

Foreign Earned Income Exclusion: The foreign earned income exclusion rises to $99,200.

Small Employer Health Insurance Credit: The maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $25,400.

Unchanged Contribution Limits: The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and thrift savings plans (TSPs) is unchanged at $17,500. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and TSPs remains unchanged at $5,500. The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

IRA Deductions: 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 modified adjusted gross incomes between $60,000 and $70,000. 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 $96,000 to $116,000. 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 $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

IRA AGI Phase-In: The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $114,000 to $129,000. For married individuals filing separate returns, the phase-out range remains $0 to $10,000.

Saver's Credit AGI Phase-In: AGI limit for the saver's credit (retirement savings contribution credit) for low and moderate-income workers -$60,000 for married couples filing jointly; $45,000 for heads of household; $30,000 for married individuals filing separately and singles.

Defined Benefit Plan Dollar Limits: The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) will be $210,000. For a participant who separated from service before January 1, 2014, the limitation is computed by multiplying the participant's compensation limitation, as adjusted through 2013, by 1.0155.

Defined Contribution Plans Limit: The limitation for defined contribution plans under Section 415(c)(1)(A) is increased to $52,000. The limitation under Section 402(g)(1) on the exclusion for elective deferrals remains unchanged at $17,500. The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased to $260,000.

Top Heavy Limit: The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased to $170,000.

ESOP Limits: The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period will be $1,050,000. The dollar amount to determine the lengthening of the 5-year distribution period will be $210,000.

Definition of Highly Compensated: The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.

Catch-Up Contributions: The dollar limitation for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

SEP Limits: The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

SIMPLE LIMITS: The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,000.

Section 457 Deferrals: The limitation on deferrals concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $17,500.

Control Employee: The compensation amount under Section 1.61-21(f)(5)(i) concerning the definition of "control employee" for fringe benefit valuation purposes will be $105,000. The compensation amount under Section 1.61-21(f)(5)(iii) will be $210,000.

 

We can be of help, call Jeffrey Adler at 847-673-2677 or email at Jeffrey@ecrllc.com.

 

 
 

Another News Brief for your Use

  

IRS Issues 2014 Inflation Adjustments
  
Cites: Rev.       Proc. 2013-35; 2013-47 IRB 1; IR-2013-86

Scroll to read the full report or click       here to download a printable pdf.

Summary: Each year at this time, the IRS releases cost of living adjustments. For estate planners, the key figures for 2014 are the new transfer tax exemption - which will be $5.34 million, up from $5.25 million. The annual exclusion for 2014 lifetime gifts has not changed-it's still $14,000 for 2014. In addition to the estate and gift tax figures above, there is a new tax rate schedule, and other tax changes as discussed below. We also list some of the 2014 key cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items.

Tax Rates: The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return).

Standard Deduction: The standard deduction:$6,200 for singles and married persons filing separate returns, $12,400 for married couples filing jointly, $9,100 for heads of household.

Itemized Deduction Limitation: The limitation for itemized deductions for individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).

Personal Exemption: The personal exemption will be $3,950 - subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly) and phases out completely at $376,700 ($427,550 for married couples filing jointly.)

AMT: The alternative minimum tax (AMT) exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly).

Earned Income Credit: The maximum earned income credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children.

Transfer Tax Exemption: The exemption equivalent of the transfer tax applicable credit amount for lifetime gifts, transfers at death, and lifetime or death time GST transfers for 2014 is increased to $5,340,000.

Annual Gift Tax Exclusion: The gift tax annual exclusion remains at $14,000.

FSA Limits: The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.

Foreign Earned Income Exclusion: The foreign earned income exclusion rises to $99,200.

Small Employer Health Insurance Credit: The maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $25,400.

Unchanged Contribution Limits: The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and thrift savings plans (TSPs) is unchanged at $17,500. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and TSPs remains unchanged at $5,500. The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

IRA Deductions: 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 modified adjusted gross incomes between $60,000 and $70,000. 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 $96,000 to $116,000. 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 $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

IRA AGI Phase-In: The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $114,000 to $129,000. For married individuals filing separate returns, the phase-out range remains $0 to $10,000.

Saver's Credit AGI Phase-In: AGI limit for the saver's credit (retirement savings contribution credit) for low and moderate-income workers -$60,000 for married couples filing jointly; $45,000 for heads of household; $30,000 for married individuals filing separately and singles.

Defined Benefit Plan Dollar Limits: The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) will be $210,000. For a participant who separated from service before January 1, 2014, the limitation is computed by multiplying the participant's compensation limitation, as adjusted through 2013, by 1.0155.

Defined Contribution Plans Limit: The limitation for defined contribution plans under Section 415(c)(1)(A) is increased to $52,000. The limitation under Section 402(g)(1) on the exclusion for elective deferrals remains unchanged at $17,500. The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased to $260,000.

Top Heavy Limit: The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased to $170,000.

ESOP Limits: The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period will be $1,050,000. The dollar amount to determine the lengthening of the 5-year distribution period will be $210,000.

Definition of Highly Compensated: The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.

Catch-Up Contributions: The dollar limitation for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

SEP Limits: The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

SIMPLE LIMITS: The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,000.

Section 457 Deferrals: The limitation on deferrals concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $17,500.

Control Employee: The compensation amount under Section 1.61-21(f)(5)(i) concerning the definition of "control employee" for fringe benefit valuation purposes will be $105,000. The compensation amount under Section 1.61-21(f)(5)(iii) will be $210,000.

 

We can be of help, call Jeffrey Adler at 847-673-2677 or email at Jeffrey@ecrllc.com.

 

DISCLAIMER

In order to comply with requirements imposed by the IRS which may apply to the Washington Report as distributed or as re-circulated by our members, please be advised of the following:

THE ABOVE ADVICE WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY YOU FOR THE PURPOSES OF AVOIDING ANY PENALTY THAT MAY BE IMPOSED BY THE INTERNAL REVENUE SERVICE.
In the event that this Washington Report is also considered to be a "marketed opinion" within the meaning of the IRS guidance, then, as required by the IRS, please be further advised of the following:

THE ABOVE ADVICE WAS NOT WRITTEN TO SUPPORT THE PROMOTIONS OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THE WRITTEN ADVICE, AND, BASED ON THE PARTICULAR CIRCUMSTANCES, YOU SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR. 
 


The AALU WRNewswire and WRMarketplace are published by the Association for Advanced Life Underwriting® as part of the Essential Wisdom Series, the trusted source of actionable technical and marketplace knowledge for AALU members-the nation's most advanced life insurance professionals.

WRNewswire #13.11.05 was written by Steve Leimberg of Leimberg and LeClair, Inc. and Leimberg Information Services, Inc. (LISI).