CARL WATTS & ASSOCIATES

February 04, 2013

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By law, a number of tax provisions must be adjusted annually to keep pace with inflation, therefore, on January 28, 2013, the IRS released Revenue Procedure 2013-15, published in Internal Revenue Bulletin 2013-5, which sets forth the inflation adjusted items for year 2013, including tax rate schedules and other tax changes specified in the American Taxpayer Relief Act of 2012. Some adjustments were announced as early as October last year in Revenue Procedure 2012-41.

Below are the most relevant inflation adjustments for the year 2013.

  • Tax rate schedules
  • The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900for married couples filing jointly) for tax year 2012.

  • The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with AGI of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)



  • There is a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

  • The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly).The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

  • The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.

  • Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.
  • The monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).
  • The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.

  • The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax”, is $1,000, up from $950 for 2012.

  • The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.

  • 2013 Pension Plan Limitations (Many of the pension plan limitations change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.)

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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.

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The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.


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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, up from $58,000 and $68,000 in 2012.

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The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.  For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. 

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The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; and $29,500 for married individuals filing separately and for singles, up from $28,750.


The IRS began processing most individual income tax returns on Jan. 30 after updating forms and completing programming and testing of its processing systems.

Returns claiming education credits (Form 8863) will be processed only as of Mid-February.

As always, we’ll keep you updated with the latest information of interest to you.

2013 Inflation Adjustments
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