Rev. Proc. 2012-41 - Inflation adjustments for 2013 

In a separate release (IR-2012-77, October 18, 2012), the IRS announced the cost-of-living adjustments to dollar limitations that will apply for pension plans for 2013. These items are described at the end of this report.

Certain inflation adjusted amounts are to be issued in future guidance

Rev. Proc. 2012-41 [PDF 96 KB] does not include certain standard amounts (as historically provided in the IRS’s annual inflation adjustment guidance) including:

• The tax rate tables
• The following credits—the adoption credit, the child tax credit, the Hope Scholarship and Lifetime Learning credits, and the earned income credit
• The standard deduction
• The overall limitation on itemized deductions
• The qualified transportation fringe benefit
• The adoption assistance exclusion
• The personal exemption amount
• The election to expense certain depreciable assets
• The interest on education loans
• The unified credit against estate tax for estates of decedents

Rev. Proc. 2012-41 states that these inflation adjustments will be addressed in future guidance.

Inflation adjustments for 2013—items of interest to exempt organizations

• The exemption of annual dues to be paid by a member to an agricultural or horticultural organization will be $155 (up from $151).
• For purposes of defining the term “unrelated trade or business,” the unrelated business income of certain exempt organizations will not include a “low cost article” of $10.20 or less.
• The $5, $25, and $50 guidelines for disregarding insubstantial benefits received by a donor in return for a fully deductible charitable contribution under section 170, as set forth in Rev. Proc. 90-12 (as amplified by Rev. Proc. 92-49, and modified by Rev. Proc. 92-102) will be $10.20, $51, and $102, respectively.
• For tax years beginning in 2013, the annual per person, family, or entity limitation to qualify for the reporting exception for nondeductible lobbying expenses under section 6033 (e)(3) will be $108 or less.

2013 inflation adjustments—items of general interest

According to Rev. Proc. 2012-41, for tax year 2013:

• The foreign earned income deduction will increase to $97,600 (an increase from the amount of $95,100 for 2012).
• The annual deductible amounts for Medical Savings Accounts (MSAs) for 2013 increase as shown in the table below:

Source: Rev. Proc. 2012-41

Estate and gift tax amounts

For an estate of any decedent dying during calendar year 2013, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,070,000 (up from $1,040,000 for 2012).

The annual exclusion for gifts increases to $14,000 (up from $13,000).

Pension plan limitation adjustments for 2013

The related IRS release (IR-2012-77) [PDF 94 KB] provides the cost-of-living adjustments to dollar limitations that will apply for pension plans for 2013 as:

• The contribution amount allowed for Roth IRAs will begin to phase out for married taxpayers filing a joint return with incomes exceeding $178,000 (up from $173,000 in 2012) and $112,000 (up from $110,000 for 2012) for single taxpayers and heads of household.
• For contributions to a traditional IRA, the deduction phase- out range for an individual covered by a retirement plan at work is increased to $95,000-$115,000 (up from $92,000-$112,000 for 2012) for joint filers, and the range is increased to $59,000- $69,000 (up from $58,000-$68,000 for 2012) for a single person or head of household.
• Participants in most employer-sponsored 401(k) plans and 403 (b) plans for employees of public schools and certain tax-exempt organizations can contribute up to $17,500 (up from $17,000 for 2012). Individuals, age 50 or over, can make an additional contribution of up to $5,500 (which is the same as for 2012).
• The annual contribution limit for most defined contribution plans is increased to $51,000 (up from $50,000 for 2012).

Rev. Proc. 2012-41 will appear in Internal Revenue Bulletin 2012-45, dated November 5, 2012.