2013 Personal Exemption and Standard Deduction

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2013 Personal Exemption and Standard Deduction

Postby Calm Man » Sat Jan 05, 2013 10:34 am

Hi,
A retiree asked me to help them "plan" their 2013 taxes -- good grief. Anyway, I cannot find the personal exemption amount and standard deduction for 2013. Is this not yet decided or I am a bad searcher?
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Re: 2013 Personal Exemption and Standard Deduction

Postby cashistrash » Sat Jan 05, 2013 10:49 am

[Rude comment removed by admin LadyGeek]
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 10:50 am

You don't want me to answer. :)

I am out at S$ with just a touch.
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Re: 2013 Personal Exemption and Standard Deduction

Postby Calm Man » Sat Jan 05, 2013 10:57 am

[Reponse to rude comment removed by admin LadyGeek]

I can only find estimates and the IRS 1040-ES which I have always used doesn't appear to be ready for 2013.
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Re: 2013 Personal Exemption and Standard Deduction

Postby HueyLD » Sat Jan 05, 2013 11:17 am

Hi Calm Man,

The IRS did not provide certain inflation adjusted amounts in October due to uncertainties. Since the ATPR just became law a few days ago, the IRS has been focusing on the more urgent need of fixing various forms and pubs for year 2012. I would not go thru a lot of work trying to calculate the new std. deductions/personal exemption since the increase will be very small with some rounding involved.

For year 2013 planning purpose, I will just use the year 2012 numbers. However, just FYI (not official numbers), the CCH Group did publish their estimates as follows:

"The 2013 standard deduction will increase for all taxpayers. The standard deduction amounts for 2013 will be $6,100 for single taxpayers; $8,950 for heads of households; $12,200 for married taxpayers filing jointly and surviving spouses; and $6,100 for married taxpayers filing separately. The standard deduction for dependents rises $50 to $1,000 (or earned income plus $350). The additional standard deduction for those have reached 65 or are blind will rise to $1,200 for married taxpayers; $1,500 for unmarried individuals."
http://hr.cch.com/news/payroll/091712a.asp
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Re: 2013 Personal Exemption and Standard Deduction

Postby BigFoot48 » Sat Jan 05, 2013 11:26 am

I've also been looking so I can update my Retiree Roth Conversion model, and some months-old info is about the best I've found, but it doesn't mention the 65 or older standard deduction bump. It's probably good enough along with the new rate/bracket info for doing forecasts.
This year, the personal exemption is $3,800. Next year it will rise to $3,900 regardless of what happens with the Bush tax cuts.

The standard deduction for single filers is currently $5,950, and it will rise to $6,100 next year regardless of what happens with the Bush tax cuts. For married filers, it’s currently $11,900, and next year it will be $12,200 if the Bush tax cuts are extended and $10,150 if they aren’t.
http://taxfoundation.org/article/next-years-tax-brackets
Last edited by BigFoot48 on Sat Jan 05, 2013 11:37 am, edited 1 time in total.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 11:33 am

The law is the law; forget the IRS.

(1) In general
Except as otherwise provided in this subsection, the term “exemption amount” means $2,000.

(A) Adjustment to basic amount of exemption
In the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1 (f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 1992” in subparagraph (B) thereof.

(3) Cost-of-living adjustment
For purposes of paragraph (2), the cost-of-living adjustment for any calendar year is the percentage (if any) by which—
(A) the CPI for the preceding calendar year, exceeds
(B) the CPI for the calendar year 1992.
(4) CPI for any calendar year
For purposes of paragraph (3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.

We had these numbers in September when the August CPI came out. Neurosphere computed the average CPI (that's U) for determining the IRA limits, but the CPI average is the same.

Here is Sept 1997 to August 1998
Code: Select all
[sept]115.0   115.3   115.4   115.4   
[1988]   115.7   116.0   116.5   117.1   117.5   118.0   118.5   119.0[aug]

Here is Sept 2011 to August 2012
Code: Select all
[sept]226.889   226.421   226.230   225.672   
[2012]   226.665   227.663   229.392   230.085   229.815   229.478   229.104   230.379[aug]   

Find the averages. Divide. Multiply by 2000. Round off. Oh, did I forget the round off rules?
(A) In general
If any increase determined under paragraph (2)(A), section 63 (c)(4), section 68(b)(2) or section 151 (d)(4) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.


Would you also like the rules for the standard deduction? :)
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Re: 2013 Personal Exemption and Standard Deduction

Postby HueyLD » Sat Jan 05, 2013 11:39 am

Thank you sscritic for another excellent refresher course. However, I am too lazy to do my own calculation and am waiting for the IRS to do their job.

However, it would be very much appreciated if you could go ahead and calculate the sscritic version of the numbers. Thank you and Happy New Year.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 11:50 am

CCH called their numbers projections, but as of mid September, they didn't have to project the August CPI.
The projected figures are based on the inflation-adjustment provisions of the Internal Revenue Code (IRC) as currently in force and the average of the Consumer Price Index for All Urban Consumers (CPI-U) published by the Department of Labor for each month in the 12-month period ending on August 31, 2012.
...
The 2013 standard deduction will increase for all taxpayers. The standard deduction amounts for 2013 will be $6,100 for single taxpayers; $8,950 for heads of households; $12,200 for married taxpayers filing jointly and surviving spouses; and $6,100 for married taxpayers filing separately. The standard deduction for dependents rises $50 to $1,000 (or earned income plus $350). The additional standard deduction for those have reached 65 or are blind will rise to $1,200 for married taxpayers; $1,500 for unmarried individuals.
...
Personal exemptions

The amount of personal and dependency exemptions for 2013 will increase to $3,900 from the 2012 level of $3,800.

tfb had the same numbers, 6100 and 3900 (his reasoning is a little off; he was doing annual adjustments rather than going back to the base year, but he may have been doing it correctly and not explaining it properly).
http://thefinancebuff.com/2013-tax-brackets.html

[note the update reference on September 17 in the comments]
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Re: 2013 Personal Exemption and Standard Deduction

Postby 555 » Sat Jan 05, 2013 1:17 pm

sscritic wrote:The law is the law; forget the IRS.

(1) In general
Except as otherwise provided in this subsection, the term “exemption amount” means $2,000.

(A) Adjustment to basic amount of exemption
In the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1 (f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 1988” for “calendar year 1992” in subparagraph (B) thereof.

(3) Cost-of-living adjustment
For purposes of paragraph (2), the cost-of-living adjustment for any calendar year is the percentage (if any) by which—
(A) the CPI for the preceding calendar year, exceeds
(B) the CPI for the calendar year 1992.
(4) CPI for any calendar year
For purposes of paragraph (3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.

We had these numbers in September when the August CPI came out. Neurosphere computed the average CPI (that's U) for determining the IRA limits, but the CPI average is the same.

Here is Sept 1987 to August 1988
Code: Select all
[sept]115.0   115.3   115.4   115.4   
[1988]   115.7   116.0   116.5   117.1   117.5   118.0   118.5   119.0[aug]

Here is Sept 2011 to August 2012
Code: Select all
[sept]226.889   226.421   226.230   225.672   
[2012]   226.665   227.663   229.392   230.085   229.815   229.478   229.104   230.379[aug]   

Find the averages. Divide. Multiply by 2000. Round off. Oh, did I forget the round off rules?
(A) In general
If any increase determined under paragraph (2)(A), section 63 (c)(4), section 68(b)(2) or section 151 (d)(4) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.


Would you also like the rules for the standard deduction? :)


Thanks sscritic. I've put this in my spreadsheet. I got $3912.809776 before rounding down.

Yes please, I'd love the rules for the standard deduction (MFJ in particular).

FWIW I get CPI numbers here
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
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Re: 2013 Personal Exemption and Standard Deduction

Postby tfb » Sat Jan 05, 2013 1:50 pm

sscritic wrote:tfb had the same numbers, 6100 and 3900 (his reasoning is a little off; he was doing annual adjustments rather than going back to the base year, but he may have been doing it correctly and not explaining it properly).
http://thefinancebuff.com/2013-tax-brackets.html

[note the update reference on September 17 in the comments]

Caught cheating :D I updated that article for the new law. The base year concept is hard to explain (and there are often different base years). Year-on-year adjustment is more intuitive but not 100% accurate because of rounding rules. For the sake of accuracy I also edited it to say comparing against the average in the base year.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 1:50 pm

26 USC § 63 - Taxable income defined
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2 (a)),
(B) $4,400 in the case of a head of household (as defined in section 2 (b)), or
(C) $3,000 in any other case.
...
(4) Adjustments for inflation
In the case of any taxable year beginning in a calendar year after 1988, each dollar amount contained in paragraph (2)(B), (2)(C), or (5) or subsection (f) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1 (f)(3) for the calendar year in which the taxable year begins, by substituting for “calendar year 1992” in subparagraph (B) thereof—
(i) “calendar year 1987” in the case of the dollar amounts contained in paragraph (2)(B), (2)(C), or (5)(A) or subsection (f), and
(ii) “calendar year 1997” in the case of the dollar amount contained in paragraph (5)(B).


(5) is dependents. Same inflation rules. Base year is 1987. Base amount 3000 for single filer. Joint is 200%.

Edit: I think 200% was going to go away, but was made permanent earlier this week. tfb had both versions, but he just destroyed history (it's my fault). :)
Last edited by sscritic on Sat Jan 05, 2013 1:59 pm, edited 1 time in total.
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Re: 2013 Personal Exemption and Standard Deduction

Postby Alan S. » Sat Jan 05, 2013 1:55 pm

Note that ATRA re introduced the personal exemption phaseout (aka PEP) for 2013. The phaseout begins at 250k AGI for singles, 300k for joint returns. Details on p 4:

http://tax.cchgroup.com/downloads/files ... n/ATPR.pdf
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Re: 2013 Personal Exemption and Standard Deduction

Postby 555 » Sat Jan 05, 2013 3:10 pm

sscritic wrote:26 USC § 63 - Taxable income defined
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2 (a)),
(B) $4,400 in the case of a head of household (as defined in section 2 (b)), or
(C) $3,000 in any other case.
...
(4) Adjustments for inflation
In the case of any taxable year beginning in a calendar year after 1988, each dollar amount contained in paragraph (2)(B), (2)(C), or (5) or subsection (f) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1 (f)(3) for the calendar year in which the taxable year begins, by substituting for “calendar year 1992” in subparagraph (B) thereof—
(i) “calendar year 1987” in the case of the dollar amounts contained in paragraph (2)(B), (2)(C), or (5)(A) or subsection (f), and
(ii) “calendar year 1997” in the case of the dollar amount contained in paragraph (5)(B).


(5) is dependents. Same inflation rules. Base year is 1987. Base amount 3000 for single filer. Joint is 200%.

Edit: I think 200% was going to go away, but was made permanent earlier this week. tfb had both versions, but he just destroyed history (it's my fault). :)


Rounding is to multiples of what? $50?

To get MFJ from single do you
(a) inlation adjust, then round, then double OR
(b) inlation adjust, then double, then round?

Note (a) is the same as
(a') inlation adjust, then double, then round to multiple of $100.

For 2012 MFJ standard deduction I get $12224.10924 which (unambiguously) rounds down to $12200.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 3:25 pm

Separating your questions:

The basic cost of living rules are in section 1, the very first section of the tax code, right below the tax brackets. A lot of other cost of living rules point you to 1 (f)(3) but might substitute different base years. I gave you the rounding rules before, taken from 1 (f)(3) [Some other sections of the code use different rounding rules, but then they specify them or say "substituting $1000 for $50" or some such.]

Edit: Oops, the cola points to 1 (f)(3) but the rounding is in 1 (f)(6) which modifies the application of 1 (f)(3)

So to repeat:
(A) In general
If any increase determined under paragraph (2)(A), section 63 (c)(4), section 68(b)(2) or section 151 (d)(4) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

But, as an example of "substituting":
In the case of a married individual filing a separate return, subparagraph (A) (other than with respect to sections 63 (c)(4) and 151 (d)(4)(A)) shall be applied by substituting “$25” for “$50” each place it appears.
This has to be read in context, (2) Method of prescribing tables, i.e., how to construct the tax tables (also done in September).

Read it all here:
http://www.law.cornell.edu/uscode/text/26/1

So if you are pointed to 1 (f)(3), round down, not off, to a multiple of $50.
Last edited by sscritic on Sat Jan 05, 2013 3:38 pm, edited 1 time in total.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 3:33 pm

Second question:

I am not positive, in fact, I just changed my mind as I started to write. My current position is to focus on the word year:

200 percent of the dollar amount in effect under subparagraph (C) for the taxable year

So you don't start with 3000 and multiply by 2 and then adjust, you start with 3000 and then adjust to get the "dollar amount in effect under subparagraph (C) for the taxable year" and then you double that.

The rounding only occurs in the computation of the "dollar amount in effect under subparagraph (C) for the taxable year," not at any other time. [A multiple of a multiple of $50 will be a multiple of $50 anyway. :) ]

I think that is your choice (a). Yes, (a), final answer. [unless proven wrong]
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Re: 2013 Personal Exemption and Standard Deduction

Postby 555 » Sat Jan 05, 2013 3:40 pm

My question was, when you apply "200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of" is this doubling done before or after rounding. The order of operations makes a difference.
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Re: 2013 Personal Exemption and Standard Deduction

Postby sscritic » Sat Jan 05, 2013 3:50 pm

555 wrote:My question was, when you apply "200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of" is this doubling done before or after rounding. The order of operations makes a difference.

I do read. I read your question. I understood it the way I understood it. But now I have a question or two for you. Is the dollar amount in effect under subparagraph (C) for a taxable year ever not rounded off? Did you ever see a standard deduction of $5346.27 in effect?

I am not a lawyer, I just try to read to the best of my ability. You are free to read as you read. Try it; read 26 USC 1 for yourself.
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Re: 2013 Personal Exemption and Standard Deduction

Postby MathWizard » Sat Jan 05, 2013 3:55 pm

Calm Man wrote:Hi,
A retiree asked me to help them "plan" their 2013 taxes -- good grief. Anyway, I cannot find the personal exemption amount and standard deduction for 2013. Is this not yet decided or I am a bad searcher?


Are you really talking anout 2013 taxes, or about 2012 taxes, payable by Apr. 2013?

If they are above the 15% bracket with their 2012 taxes, they have enough money to talk to a professional.
If they are in the 15% tax or below, and absolutely need to estimate now, just estimate from 2012 taxes, they'd be close.
I did all my tax planning in last month when it counted.
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Re: 2013 Personal Exemption and Standard Deduction

Postby 555 » Sat Jan 05, 2013 3:59 pm

sscritic wrote:
555 wrote:My question was, when you apply "200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of" is this doubling done before or after rounding. The order of operations makes a difference.

I do read. I read your question. I understood it the way I understood it. But now I have a question or two for you. Is the dollar amount in effect under subparagraph (C) for a taxable year ever not rounded off? Did you ever see a standard deduction of $5346.27 in effect?

I am not a lawyer, I just try to read to the best of my ability. You are free to read as you read. Try it; read 26 USC 1 for yourself.


Ok, got it. Thanks for clarifying.
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