Author: Rena Pirsos, XpertHR Legal Editor

The IRS has announced annual inflation adjustments for tax year 2013, reflecting increases in amounts for excludable transportation fringe benefits, adoption assistance benefits, the standard deduction and personal exemption. IT-2013-4, Jan. 11, 2012; +Rev. Proc. 2013-15, IRB 2013-5 Jan. 28, 2013.

Qualified Transportation Fringe Benefits

The monthly income exclusion for employer provided mass transit, van pool and parking benefits for 2013 has been adjusted to $245. In 2012, the qualified parking amount was $240 per month. The 2012 amount for mass transit and van pool benefits also was $240 per month, but was retroactively increased by the American Taxpayer Relief Act of 2012 (ATRA 2012; Pub. Law No. 112-240) from the $125 limit previously in effect. ATRA 2012 extended parity between parking and mass transit benefits through December 31, 2013.

Adoption Assistance Benefits

In 2013, the maximum amount that can be excluded from an employee's gross income for qualified adoption expenses under an adoption assistance plan is increased to $12,970 (was $12,650 in 2012). The amount that may be excluded from an employee's gross income begins to phase out at adjusted gross incomes of $194,580 (was $189,710 in 2012), and is completely phased out at adjusted gross incomes of $234,580 (was $229,710 in 2012).

Standard Deduction

The 2013 standard deduction amounts increase to $12,200 for married couples filing jointly or surviving spouses (was $11,900 in 2012), $6,100 for single individuals and married taxpayers filing separately (was $5,950 in 2012), and $8,950 for heads of household (was $8,700 in 2012).

Personal Exemption

The 2013 personal exemption amount is increased to $3,900 (was $3,800 in 2012). Under ATRA 2012, the exemption phases out beginning with adjusted gross incomes of $250,000 for single taxpayers, $300,000 for married couples filing jointly or surviving spouses, $150,000 for married taxpayers filing separately, and $275,000 for heads of households. It phases out completely at $372,500 for single taxpayers, and at $422,500 for married couples filing jointly.

XpertHR has updated the Taxation of Employee Compensation section of the Payroll chapter, including Practical Examples, and FAQs on adoption assistance and transportation assistance fringe benefits to reflect these changes.