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Friday, November 1, 2013

Tax and Cost-of-Living Adjustments for Individuals

On October 31, the IRS released most cost-of-living adjustments for 2014. With inflation remaining relatively low, there are many amounts that will stay the same as they were for 2013, and those that do change increase only modestly. Nevertheless, as you consider 2013 year-end tax planning strategies, it’s helpful to know what these amounts will be for 2014 so you can take them into account in your planning.

Tax and Cost-of-Living Adjustments for Individuals
Tax brackets will widen and personal exemptions will increase for 2014, but by smaller margins than they rose for 2013. Taxbracket thresholds increase for each filing status but, because they’re based on percentages, they increase more significantly for the highest tax bracket (outlined below). For a list of all 2014 ordinary income tax brackets, please visit IRS.gov.


Retirement Plans
Most retirement-plan-related limits won’t go up in 2014, but a few will—potentially providing slightly enhanced opportunities to build retirement savings.

Gift and Estate Taxes
The 2012 taxpayer relief act set a maximum rate of 40% for gift, estate and generation-skipping transfer (GST) taxes. It also retained a $5 million unified gift and estate tax exemption and a $5 million GST tax exemption. Both exemptions are adjusted annually for inflation.

Each business situation is unique, we encourage you to contact your tax professional at Armanino to discuss your specific business situation.


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