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IRS Increases Exemption From Estate Tax to $5.25 Million

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Jan. 11 (Bloomberg) -- 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 today. 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.

To contact the reporter on this story: Margaret Collins in New York at mcollins45@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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