Tuesday, October 1, 2013

2014 Inflation Adjusted Tax Limits

     As you are aware, a number of tax figures are adjusted each year for inflation. The Government has released Inflation adjusted 2014 figures for Estate and Trust Tax brackets and other Transfer Tax items. The adjustments are based on the average Consumer Price Index (CPI) for the 12-month period ending the previous August 31. The August 2013 CPI has been released by the Labor Department, and using the CPI for August 2013, (and the preceding 11 months) some of the tax figure adjustments for 2014 are: 
  • Unified estate and gift tax exclusion amount. For gifts made and estates of decedents dying in 2014, the exclusion amount will be $5,340,000 (up from $5,250,000 for gifts made and estates of decedents dying in 2013).
  • Generation-skipping transfer (GST) tax exemption. The exemption from GST tax will be $5,340,000 for transfers in 2014 (up from $5,250,000 for transfers in 2013).
  • Gift tax annual exclusion. For gifts made in 2014, the gift tax annual exclusion will be $14,000 (same as for gifts made in 2013).
  • Determining 2% portion for interest on deferred estate tax. In determining the part of the estate tax that is deferred on a farm or closely-held business that is subject to interest at a rate of 2% a year, for decedents dying in 2014, the tentative tax will be computed on $1,450,000 (up from $1,430,000 for 2013) plus the applicable exclusion amount.
  • Increased annual exclusion for gifts to noncitizen spouses. For gifts made in 2014, the annual exclusion for gifts to noncitizen spouses will be $145,000 (up from $143,000 for 2013).
  • Kiddie tax. The exemption from the kiddie tax for 2014 will be $2,000 (same as for 2013). A parent will be able to elect to include a child's income on the parent's return for 2014 if the child's income is more than $1,000 and less than $10,000 (same as for 2013).
  • 2014 Estates and Trust tax rate brackets:
If taxable income is                                                                       The tax is:
Not over $2,500..................................................................................... 15% of taxable income
Over $2,500 but not over $5,800........................$375.00 plus 25% of the excess over $2,500
Over $5,800 but not over $8,900.................... $1,200.00 plus 28% of the excess over $5,800
Over $8,900 but not over $12,150...................$2,068.00 plus 33% of the excess over $8,900
Over $12,150..............................................$3,140.50 plus 39.6% of the excess over $12,150

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