Bloomberg BNA has projected inflation-adjusted amounts for 2014 using a derivative of the formula in §1(f)(3)  and data from the Consumer Price Index. The projected inflation adjustments are designed to give tax preparers and advisers the opportunity to initiate tax preparation, year-end estimation and tax planning as soon as possible. The IRS typically does not release the annual inflation adjustments until late fall. 

The projections take into account the significant changes to the Code that were made by the American Taxpayer Relief Act of 2012, P.L. 112-240 (ATRA). ATRA instituted a new marginal top tax rate of 39.6% for taxpayers with income exceeding an inflation-adjusted threshold. For 2014, the taxable income thresholds on trusts and estates under §1(e) should be as follows: 

If taxable income is: 

• Not over $2,500, the tax is 15% of the taxable income.
• Over $2,500, but not over $5,800, the tax is $375 plus 25% of the excess over $2,500. 
• Over $5,800, but not over $8,900, the tax is $1,200 plus 28% of the excess over $5,800. 
• Over $8,900, but not over $12,150, the tax is $2,068 plus 33% of the excess over $8,900. 
• Over $12,150, the tax is $3,140.50 plus 39.6% of the excess over $12,150. 

 ATRA also made permanent the §§2010(c) and 2505(a) unified credit against estate and gift tax (implemented by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312), which is adjusted for inflation each year for decedents dying and gifts made after 2011.  For decedents dying and gifts made in 2014, the adjusted amount of the applicable exclusion should be $5,340,000. 

 The §2503 annual gift tax exclusion for gifts of current interest in property made in 2014 should remain the same at $14,000 per donee. For gifts of current interest in property made to a noncitizen spouse in 2014, the annual gift tax exclusion under §§2503 and 2523(i)(2) should increase to $145,000.  Additionally, donees of gifts from certain foreign persons may be required to report these gifts under §6039F if the aggregate value of the gifts received in 2014 should exceed $15,358.  

 For estates of decedents dying in 2014, it is projected that the special use valuation method under §2032A for qualified property should not exceed $1,090,000.  For estates of decedents dying in 2014 extending payment of estate tax under §6166, the portion of the deferred estate tax subject to the 2% interest rate under §6601(j) should be $1,450,000. 

 Regarding expatriation to avoid tax, for individuals losing U.S. citizenship in 2014, it is projected that an average annual net income tax of more than $157,000 for the five previous tax years is a covered expatriate for purposes of §877A(g)(1). A covered expatriate’s includible gross income should be reduced by $680,000 (but not below zero) for purposes of §877A(a)(1) in 2014.  

 The projections also include inflation-adjusted amounts affecting exempt organizations. For the §6033(e)(3) reporting exception for certain exempt organizations with nondeductible lobbying expenditures, the annual per person, family or entity dues threshold should be $110 or less in 2014. For §501(c)(5) agricultural and horticultural organizations, the §512(d)(1) limitation for exemption of annual dues required to be paid by a member should be $158 in 2014. The unrelated business income of certain exempt organizations under §513(h)(2) in 2014 should not include a low cost article of $10.40 or less.  For organizations receiving fully-deductible charitable contributions under §170 where the donor received insubstantial benefits in return, the inflation-adjusted guidelines of Rev. Proc. 90-12, 1990-1 C.B. 471, §3 should be $10.40, $52 and $104 in 2014. 

 For a discussion of the 2014 inflation-adjusted amounts pertaining to individuals, please visit http://www.bna.com/bloomberg-bna-releases-b17179877174/. 

 For the full Bloomberg BNA projected inflation adjustments, please visit http://www.bna.com/projected-tax-rates/. 

Michelle Vesole, J.D., LL.M.
Bloomberg BNA Tax Law Editor
Estates, Gifts and Trusts Group