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State and Federal Tax Changes for 2014

Posted Friday, November 15, 2013 by John S. Palmer

Here is a summary of the changes to Washington’s estate tax as well as to federal gift, estate and income taxes that will take effect next year.

Federal Tax Changes

The IRS has just announced the adjustments to be made to various tax code provisions in 2014. Some of the key figures of interest to estate planners are:

Unified Credit Against Estate Tax: The basic exclusion amount for the estate of any decedent dying during calendar year 2014 is $5,340,000.

Annual Exclusion for Gifts: For calendar year 2014, the first $14,000 of gifts to any person (other than gifts of future interests in property) will not be included in the total amount of taxable gifts made during that year.

Gifts to Non-Citizen Spouses: The first $145,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) will not be included in the total amount of taxable gifts under made during that year.

Valuation of Qualified Real Property in Decedent’s Gross Estate. For an estate of a decedent dying in calendar year 2014, if the executor elects to use the special use valuation method under §2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use §2032A for purposes of the estate tax cannot exceed $1,090,000.

Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2014, the Treasury Department and the Internal Revenue Service will require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $ 15,358.

Standard Deduction: The standard deduction for income tax purposes in 2014 will be $6,200 for unmarried individuals and marries persons filing separately; $9,100 for heads of household, and $12,400 for married persons filing joint returns.

Personal Exemption Amount. In 2014 the personal exemption for income tax purposes will be $3,950.

All of the inflationary adjustments and other changes taking effect in 2014 are set forth in Revenue Procedure 2013-35

Washington Estate Tax Changes

Washington will also implement some changes to its estate tax in 2014:

• The $2,000,000 life exclusion amount will be indexed for inflation, based on the consumer price index for the Seattle-Tacoma-Bremerton metropolitan area. The Washington Department of Revenue has not yet announced what the adjusted figure will be.

• The estate tax deduction for certain family-owned businesses takes effect January 1, 2014. Details of this new deduction were discussed in this previous blog post.

Proposed regulations for implementing these and other changes to the estate tax have been published in the Washington State Register for public comment, with a public hearing scheduled in Olympia for December 16 at 10:00 a.m.

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or

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