Following passage of the American Taxpayer Relief Act of 2012 (the Act)–the legislation that seals the “fiscal cliff” deal–the IRS has issued its final 2013 cost of living adjustments to incorporate the latest tax rates. A couple of these adjustments differ from the rates established by the Act, as we described in our blog on January 4, 2013. Those changes are noted below.
- Mass Transit & Vanpool Expense Benefits. The IRS retained the $240 per month retroactive mass transit and vanpool expense benefit limit for 2012, but increased that limit to $245 per month for 2013. The tax benefit is still set to expire after December 31, 2013. The employer-provided parking expense maximum was also increased to $245 per month.
- Adoption Tax Credit and Adoption Assistance Programs. The Act provided for a $10,000 per year tax credit for qualified adoption expenses, and also an exclusion from income for certain adoption expenses paid by an employer for taxable years beginning after December 31, 2012. The IRS increased that limit to $12,970 (up from the 2012 limit of $12,650). The credit and exclusion begin to phase out for individuals with modified adjusted gross income in excess of $194,580, and is completely phased out for individuals with modified adjusted gross income of $234,580 or more. This phase-out for 2012 was $189,710 and $229,710, respectively.