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The IRS has released inflation adjustments for some provisions commonly claimed on individual tax returns.

IRS Releases 2013 Tax Rates, Adjusted for Inflation

  • 10/24/2012

The IRS has released new inflation-adjusted amounts for tax years beginning in 2013. Here are some of the more commonly applicable inflation adjustments that may apply to individual tax returns.

Kiddie tax: For purposes of determining whether a child’s unearned income is taxed at the parent’s tax rate under Code Sec. 1(g), the amount by which the child’s net unearned income is increased for 2013 to $1,000. The child’s income can be reported on the parent’s return if the child’s gross income is more than $1,000, and less than $10,000. The exemption amount for purposes of the alternative minimum tax cannot exceed the sum of the child's earned income for the tax year, plus $7,150.

Low-income housing credit: The amount used to calculate the 2013 state housing credit ceiling for the low-income housing credit under Code Sec. 42(h)(3)(C)(ii) is the greater of $2.25 multiplied by the state population, or $2.59 million.

Savings bond education exclusion: The exclusion under Code Sec. 135 for taxpayers who pay qualified higher education expenses begins to phase out for modified adjusted gross income (MAGI) above $112,050 for joint returns and $74,700 for other returns. The exclusion phases out completely at MAGI levels of $142,050 for joint returns and $89,700 for other returns.

Private activity bonds volume cap: The calendar year 2013 amounts used under Code Sec. 146(d)(1) to calculate the state ceiling for the volume cap for private activity bonds is the greater of $95 multiplied by the state population, or $2.9 million.

Loan limits on agricultural bonds: The 2013 loan limit amount on agricultural bonds under Code Sec. 147(c)(2)(A) for first-time farmers is $501,100.

Long-term care premiums: The limitations under Code Sec. 213(d)(10) regarding eligible long-term care premiums included in the term "medical care" are $360 (attained age of 40 or less before close of tax year), $680 (age 41-50), $1,360 (age 51-60), $3,640 (age 61-70), and $4,550 (over 70).

Medical savings accounts: For tax years beginning in 2013, the term "high deductible health plan," as defined in Code Sec. 220(c)(2)(A), means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,150 and not more than $3,200, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,300. For family coverage, the term means a health plan that has an annual deductible that is not less than $4,300 and not more than $6,450, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,850.

Low-cost article: For purposes of defining the term "unrelated trade or business" for certain exempt organizations under Code Sec. 513(h)(2), "low-cost articles" are those costing $10.20 or less.

Foreign earned income exclusion: The foreign earned income exclusion amount under Code Sec. 911(b)(2)(D)(i) is $97,600.

Gross estate valuation of real property: For an estate of a decedent dying in calendar year 2013, if the executor elects to use the special use valuation method under Code Sec. 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use Code Sec. 2032A for purposes of the estate tax cannot exceed $1.07 million.

Estate and gift taxes: The annual gift tax exclusion from the total amount of taxable gifts made under Code Sec. 2503 increases to $14,000.

Notice of large gifts from foreign persons: Code Sec. 6039F authorizes the U.S. Treasury Department and the IRS to require certain foreign persons to report the recipient of gifts if the aggregate value of gifts received in the tax year exceeds $15,102.

Property exempt from levy: The value of property exempt from levy under Code Sec. 6334(a)(2) (fuel, provisions, furniture, other household personal effects, arms for personal use, livestock, and poultry) cannot exceed $8,790. The value of property exempt from levy under Code Sec. 6334(a)(3) (books and tools necessary for the trade, business or profession of the taxpayer) cannot exceed $4,400.

Attorney fee award: For fees incurred in calendar year 2013, the attorney fee award limitation under Code Sec. 7430(c)(1)(B)(iii) is $190 per hour.

Periodic payments received under certain contracts: The 2013 dollar amount of the per diem limitation under Code Sec. 7702B(d)(4), regarding periodic payments received under either a qualified long-term care insurance contract or a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $320.

These inflation-adjusted figures generally apply to tax years beginning in 2013, except for certain specified figures that apply to transactions or events occurring in calendar year 2013.

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