While we await possible major tax impacts from further implementation of President Obama’s health care legislation and continuation or lapse of the Bush tax cuts, there is some good news to report this week. Due to inflation adjustments, the IRS has announced several increases in various tax benefits in 2013 in the areas of gifting, the “kiddie tax” and retirement savings.
Currently, the annual gift tax exclusion is $13,000 per person per donee. This annual exclusion is the amount you can gift to any number of individuals per year with no gift tax implications. For example, if you have 3 children, you can gift each child up to $13,000 per year (total gifts of $39,000) under the current exclusion. Starting January 1, 2013, this annual exclusion amount increases to $14,000. While this $1,000 per person per donee increase seems small, remember that your spouse can double the annual exclusion amount by joining in the gift (or can make a gift in the same amount), and that you and your spouse can make annual gifts to any number of persons.
For tax year 2012, taxpayers can reduce a child’s unearned income subject to the “kiddie tax” by $950. For 2013, the number increases to $1,000. This will permit a child to earn $50 more before being taxed at their parents’ tax rates.
The maximum an employee can now contribute to a 401(k) plan is $17,000. In 2013, the number will increase to $17,500. Employees aged 50 and over may continue to contribute an additional $5,500 per year, bringing their maximum to $23,000 per year starting in 2013.
If you have any questions or comments about these tax benefits, please contact Joseph Mattera at Jmattera@pselaw.com or 937-223-1130.
AND ONE MORE THING. The BWC offers grants to employers under the Safety Intervention Grants Program, the Drug Free Safety Program, the Workplace Wellness Grant Program and the Transitional Work Grants Program. Sarah Carter can provide more information about these grant programs. If you have any questions or comments about any tax or business matters, please contact Sarah Carter at Scarter@pselaw.com or Jsenney@pselaw.com or 937-223-1130.