The IRS has released most cost-of-living adjustments for 2014.  These are automatic adjustments built into tax law, though the adjustments do not always result in increases.  With Inflation remaining relatively low, there are many amounts that will stay the same.  Those that do change show only modest increases.

Following are the new limits for some of the key items we are asked about most often.

Retirement

Most retirement plan limits will not go up in 2014, but a few will, providing slightly enhanced opportunities to build retirement savings.


Type of limitation

2013 limit

2014 limit

Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$17,500

$17,500

Annual benefit for defined benefit plans

$205,000

$210,000

Contributions to defined contribution plans

$51,000

$52,000

Contributions to SIMPLEs

$12,000

$12,000

Contributions to IRAs

$5,500

$5,500

Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$5,500

$5,500

Catch-up contributions to SIMPLEs

$2,500

$2,500

Catch-up contributions to IRAs

$1,000

$1,000

Compensation for benefit purposes for qualified plans and SEPs

$255,000

$260,000

Minimum compensation for SEP coverage

$550

$550

Highly compensated employee threshold

$115,000

$115,000

Keep in mind there are other factors which may further limit your own contribution amounts.  This table reflects the maximum limits.

Gift and Estate Taxes

The annual gift tax exclusion remains at $14,000 for 2014.

The 2012 taxpayer relief act retained a $5 million unified gift and estate tax exemption and a $5 million generation-skipping transfer (GST) tax exemption. Both exemptions are adjusted annually for inflation.  The 2014 amount is $5.34 million (up from $5.25 million for 2013).

More Changes On the Horizon

Some key adjustments affecting higher-income taxpayers have yet to be released, such as the thresholds for the expanded Medicare taxes that went into effect in 2013 under the Affordable Care Act. This additional 0.9% tax on FICA and self-employment income and the new 3.8% tax on net investment income can affect not just taxpayers in the top regular income tax bracket of 39.6%, but also those in the 33% and 35% brackets. So you’ll want to be on the lookout for these numbers when they come out so you can take them into account in your tax planning.

The 2014 amounts are important to consider while doing 2013 year-end tax planning.  Contact your tax advisor to discuss.