2014 Inflation-Adjusted Figures

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Nikki Marie Oliveira, Esq., LL.M., Bass, Doherty & Finks, P.C.
Michelle B. Kalas, Esq., Riemer & Braunstein LLP

The IRS recently announced the following inflation-adjusted items for 2014:

Gift Tax 

  • Annual Exclusion for Gifts.  The annual exclusion for gifts remains at $14,000 for 2014.
  • Annual Exclusion for Gifts to Non-U.S. Citizen Spouse.  The annual exclusion for gifts to a non-U.S. citizen spouse under §§ 2503 and 2523(i)(2) increases to $145,000 for 2014 (up from $143,000 in 2013).
  • Notice of Large Gifts Received from Foreign Persons.  For 2014, gifts from foreign persons in excess of $15,358 in a taxable year are required to be reported (the threshold in 2013 was $15,102).

Estate Tax

  • Federal Estate Tax Applicable Exclusion Amount.  For estates of decedents dying in 2014, the federal estate tax applicable exclusion amount under § 2010 is $5,340,000 (an increase of $90,000 from 2013).
  • Valuation of Qualified Real Property in Decedent’s Gross Estate.  For estates of decedents dying in 2014, if the personal representative elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from the election for purposes of the estate tax cannot exceed $1,090,000 (formerly $1,070,000 in 2013).
  • Interest on a Certain Portion of the Estate Tax Payable in Installments.  The dollar amount used to determine the “2-percent portion” for calculating interest under § 6601(j) of the estate tax extended as provided in § 6166 is $1,450,000 for 2014 (up from $1,430,000 in 2013).

Income Tax

  • Foreign Earned Income Exclusion.  Under § 911(b)(2)(D)(i), this figure is now $99,200 (previously $97,600 in 2013).
  • Tax Responsibilities of Expatriation. The exemption for appreciation in assets recognized by a covered expatriate is increased to $680,000 for expatriations that occur in 2014.
  • Expatriation to Avoid Tax. The standard for determining whether an expatriate is a “covered expatriate” under section 877A(g)(1) is based on whether his or her average annual net income tax exceeded $157,000 for the five taxable years ending before the date of expatriation for tax years beginning in 2014.

Long-Term Care Insurance Premiums

  • For 2014, the limitations under § 213(d)(10) regarding a portion of eligible long-term care insurance policy premiums to be treated as a medical expense for itemizing deductions is based on the taxpayer’s age, as follows:

Age                             Per Individual
40 and under               $370
41-50                           $700
51-60                           $1,400
61-70                           $3,720
71+                              $4,660

Please see Rev. Proc. 2013-35 for additional inflation updates.