The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2013. In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.

Taxpayers may contribute up to $17,500 to their 401(k) and 403(b) plans in 2013 and for those age 50 and above, the limit is $23,000. All the pension plan and retirement-related items can be found in IR-2012-77. The annual inflation adjustments for more than two dozen tax provisions were also announced including:

• 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.

Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found in Revenue Procedure 2012-4, which was published in Internal Revenue Bulletin 2012-45 on Nov. 5, 2012 The Social Security Administration has also announced the OASDI and SSI program rates for 2013.

For further information on this topic please contact any member of our Tax Services Team. For the latest tax information, rates, changes and updates please visit the KLR Tax Blog.