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Year-End Planning and 2014 Revised Exemptions and Rates

November 2013

Many of our tax laws now have built-in adjustments for costs of living or interest rates measured by treasury bonds and the like. These affect our planning for charitable trusts, GRATs, QPRTs and the like. The high profile numbers for estate planning include the estate tax exemption and the annual gift exclusion. The "7520" rate for loans and trusts is also important, but this latter factor is adjusted monthly, whereas the estate and gift tax numbers are annual and, with respect to the gift tax annual exclusion, it is adjusted only in $1,000 increments.

For 2014, the estate and generation skip transfer exemptions will increase from $5,250,000 to $5,340,000. Who knows if Congress will allow this to continue, but it is the law and will continue to increase annually until the law is changed.

The annual exclusion for gifts remains at $14,000. The Rev. Proc. 2013-35 states the following:

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

  • The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates - 10, 15, 25, 28, 33 and 35 percent - and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
  • The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
  • The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly).
  • The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
  • The annual exclusion for gifts remains at $14,000 for 2014.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
  • The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
  • The small employer health insurance credit provides that the maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.

Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2013-35, which will be published in Internal Revenue Bulletin 2013-47 on Nov. 18.


We all have different situations that call for a review of our stock portfolio, retirement plan contributions, acceleration or deferral of charitable donations and the like. This year there are additional taxes imposed on investment gains for the Medicare taxes and the State of California has added its own high income tax brackets. If you have sold your home, you may well be into these higher rates and additional taxes. Also, if your gross income from the sale of assets puts you in a higher bracket, you may be required to pay your taxes and estimated taxes on line rather than by check. The FTB imposes a 1% penalty for paying by check if you fall into this category. Isn't that something? Also, once you are in the FTB system, it is very difficult to elect out. I attach a link to some year-end tax planning issues and ideas.

2013 Year-End Tax Planning - CCH
Oct 11, 2013 - 2013 Year-End Tax Planning. Year-end 2013 brings many new planning opportunities along with the traditional year-end tax planning.

Please remember to check my website for information. We are hoping to renew our lease but the building has been sold and we may be relocating.


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© 2013 Roskoph Associates
Paul H. Roskoph
Paul H. Roskoph Prof. Corp.
550 Hamilton Ave. #100
Palo Alto, CA 94301

tel 650.470.5300
direct tel 650.470.5301
fax 650.326-2404