IRS Announces 2013 Pension Plan Limitations and Various Tax Benefits Increase Due to Inflation Adjustments
October 19, 2012
The Internal Revenue Service recently announced cost of living and inflation adjustments for pension plans, retirement related items, and numerous tax provisions for tax year 2013.
Highlights include:
- The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.
- The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
- 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 (AGI) between $59,000 and $69,000.
- 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 $95,000 to $115,000.
- 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 $178,000 and $188,000.
- The adjusted gross incomes (AGI) phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $112,000 to $127,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
- Effective January 1, 2013, the limitation on the annual benefit under a defined benefit plan increased to $205,000.
- SIMPLE retirement accounts are increased from $11,500 to $12,000.
- The adjusted gross income limitation for determining the retirement savings contribution credit for taxpayers filing as head of household is increased to $26,625.
- The adjusted gross income limitation for determining the retirement savings contribution credit for all other taxpayers is increased to $17,750.
- The deductible amount for an individual making qualified retirement contributions increased from $5,000 to $5,500.
Should you have any questions regarding the recent IRS announcement or any tax related questions, please contact us.
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