IRS INFLATION ADJUSTMENT - DEDUCTION INCREASES FOR 2013

• The foreign earned income exclusion will go from $95,100 to $97,600 for 2013.  Remember if both spouses work they can each claim up to that amount on their separate foreign wages on form 2555.
• The gift tax exclusion (threshold after which you must file a gift tax return) is increased from $13,000 to $14,000.  If a husband and wife both give the gift (and both are US taxpayers) they can claim a combined exclusion of $28,000 in 2013.  Gifts for education costs and health care are not subject to gift tax.
• The maximum contribution limits by an employee to a 401K plan increases to $17,500 in 2013.
• The social security ceiling for wages subject to that tax increases to $113,700 in 2013 from the current $110,100. Their is no ceiling on the 2.3 percent medicare tax.