With the New Year will come a new set of tax rates and tax codes for your clients to deal with. Many of these will affect not only their estate planning in the coming year, but quite possibly the last-minute moves they wish to make from now through the end of 2013.
Many of the changes are indexed to inflation, and with the consumer price index running at a tepid 1.0 percent, the increases have been modest. Still the numbers present a bit of a moving target and are worth keeping an eye on. Here’s a rundown of some of the changes that are already in the books for 2014:
The estate tax exemption is going up but just marginally, to $5.34 million in 2014 from $5.25 million in 2013. The American Taxpayer Relief Act of 2012 set the estate exemption to remain static, although it’s indexed to inflation, which is why it increased by 1.7 percent for next year. The estate tax rate itself remains unchanged at 40 percent.
The annual gift tax exemption amount remains static at $14,000 per recipient, although the lifetime exclusion rises to $5.34 million. One rather esoteric change: The annual gift exemption amount for noncitizen spouses increases to $145,000 in 2014 from $143,000 in 2013.
Alternative minimum tax
The AMT is always a potential problem for even middle-class people who itemize deductions. The exemption is projected to rise to $82,100 for married couples filing jointly and surviving spouses, $52,800 for unmarried single filers and heads of household and $41,050 for married couples filing separately in 2014.
Clients who fear being subject to the AMT this year but might miss it next year could try to defer some of their deductions into 2014, when they would actually be able to use them.
While individual income tax rates will remain the same in 2014, some of the threshold amounts at which taxpayers become affected by those rates are rising. The threshold amount for the maximum tax rate of 39.6 percent is rising to $457,600 for married couples filing jointly, $228,800 for married couples filing separately, $432,200 for heads of households, and $406,750 for single filers.
Capital gains taxes