Every year there are changes in the tax laws. This year is no exception. Although the final changes are never completely known until the end of the year, here are some things we do know. As the year comes to a close it’s important to consider how these changes will affect your tax strategy.
- The biggest change will be the health care reform. We have covered this in previous posts. We encourage you to check them out and check with your tax advisor as to how it personally affects you.
- Social Security wage base increases this year. This is the maximum amount you can make and still have to pay Social Security tax. The new limit is $117,000 up $3,300 from last year.
- The amount you can contribute to a HSA (Health Savings Account) has gone up slightly for 2014 you can contribute $6,550 for family coverage and $3,300 for self coverage. People born before 1960 can contribute and extra $1,000.
- US taxpayers working abroad have a slightly larger exclusion. They can exclude up to $99,200 of their income while working abroad as long as they have been working out of the country for one year.
- Student loan interest will be limited for tax payers whose AGI exceeds $130,000 for couples and $65,000 for singles.
- The Lifetime Learning Credit begins to phase out at higher income levels. For singles it starts at $54,000 of income and for couples, $108,000.
- The adoption credit can be taken on up to $13,190 of costs, a boost of $220. However the full credit is available for special needs adoptions, even if the cost is less.
- The 2014 income tax brackets are a tad wider than those of 2013. This means that taxpayers can earn a little more before they bump up to a higher tax bracket.
- The standard deduction is up $200. Personal exemptions are up $50 per person.
- The gift tax exclusion (how much you can gift a person) stays the same at $14,000 per gift. Remember gifts are not tax deductible to the person giving the gift and not taxable to the recipient.
- The standard mileage rate has gone down to 56 cents per mile for business driving. Medical mileage and moving mileage is at 23.5 cents per mile and charitable mileage is still 14 cents per mile.
Things that have expired, but are anticipated to be reinstated are:
- The amount of business assets that can be deducted changed. It was $500,000 and now is $250,000.
- The 50% bonus depreciation has expired.
- Several business tax breaks are gone such as the R&D tax credit, 15% depreciation for restaurant renovations and the work opportunity tax credit for hiring disadvantages workers.
- The ability for taxpayers 70 ½ and older to make charitable contributions of $100,000 per year from their IRAs also expired.
These are the changes that affect the majority of people. Look for future posts as we solidify these changes.
If you have any questions about how these changes will affect your taxes next year, contact us!