COLA boosts estate tax exemption for couples to $10.5M

Taxpayers will be able to leave an extra $130,000 to their heirs free of estate taxes this year under cost-of-living adjustments announced by the Internal Revenue Service. The estate-tax exemption for 2013 will be $5.25 million for individuals, up from $5.12 million in 2012, the IRS said in a statement on Friday. For married couples, the combined threshold is $10.5 million. The budget deal passed by Congress Jan. 1 made permanent the estate- and gift-tax exclusions and indexed them for inflation so they will increase over time. The exemption limits were set to drop to $1 million in 2013 if Congress hadn't acted. The IRS announcement on cost-of-living adjustments for 2013 also affects the standard deduction and personal exemption thresholds as well as the brackets for income-tax rates. The budget deal created a new tax rate of 39.6 percent for individuals whose annual income exceeds $400,000, or $450,000 for married couples. --Bloomberg News--