Here's a quick summary if what's new in federal taxes for the year 2014.
- There are seven tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) that apply to ordinary income, and three tax brackets (0%, 15%, 20%) that apply to long-term gains and qualified dividends. This is the same tax rate structure as for the year 2013, but the income brackets to which the rates apply have been adjusted to account for inflation.
- Additionally, the 0.9% Medicare surtax and the 3.8% net investment income surtax, first introduced for 2013, continue to apply to higher-income people (over $200,000 for single filers).
- Single: $6,200
- Head of Household: $9,100
- Married Filing Jointly: $12,400
- Married Filing Separately: $6,200
- Qualifying Widow/Widower: $12,400
- Dependent: $1,000-$6,200
- $3,950 per taxpayer or dependent.
- The amount that can be claimed phases out once adjusted gross income reaches $254,200 (for single filers).
- Traditional or Roth Individual Retirement Accounts: $5,500 (plus $1,000 catch-up contribution for people age 50 or older)
- 401(k) Plans: $17,500 (plus $5,500 catch-up contribution for people age 50 or older)
- 403(b) Plans: $17,500 (plus $5,500 catch-up contribution for people age 50 or older)
- 457 Plans: $17,500 (plus $5,500 catch-up contribution for people age 50 or older)
- SIMPLE IRA plans: $12,000 (plus $2,500 catch-up contribution for people age 50 or older)
- Maximum SEP-IRA or solo 401(k) contribution:$52,000
New tax provisions
- Penalty for failing to maintain health insurance. (By the way, whoever claims a dependent for 2014 will be responsible for paying the penalty if the dependent doesn't have health insurance.)
- Premium assistance tax credit for obtaining coverage through the health insurance exchange.
Same-sex married couples
- must file their federal return using either the married filing jointly or married filing separately status, although they might need to file their state returns as if they were single depending on what state they live in.
Tax provisions that expired at the end of 2013. These may or may not be renewed by Congress.
- Exclusion for Cancellation of Debt Income on Primary Residences
- Tax-free distributions from individual retirement plans for charitable purposes
- Exclusion for qualified small business stock (modified to 50% from 100% exclusion)
- Mass Transit Fringe Benefit Reduced (drops from $245 to $130 per month)
- Classroom Expenses Deduction
- Tuition and Fees Deduction
- Deduction for Mortgage Insurance Premiums
- Deduction for State and Local Sales Tax
- Charitable contributions of real property made for conservation purposes
- Credit for nonbusiness energy property
- Credit for two- or three-wheeled plug-in electric vehicles
- Health Coverage Tax Credit
- Work Opportunity Tax Credit
- Bonus Depreciation
- Section 179 Deduction (modified to $25,000 instead of $500,000 maximum)
- Qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (these assets are now depreciated over 39 years instead of 15 years)
Tax provisions that expire at the end of 2014
- January 31, IRS will begin processing personal tax returns.
- April 15, the normal deadline for filing personal returns. (It falls on a Tuesday.)
- October 15, the extended deadline for filing personal returns. (It falls on a Wednesday.)
- This form has been changed in two ways. First, the form has been re-numbered: it's now called FinCEN Form 114. Second, FBARs must be filed electronically with FinCEN. If you want to file on paper, you'll need to request permission. See the new FBAR instructions from FinCEN (pdf) and the IRS's page about FBARs.
May you have a prosperous new year!