It is that time of year again, where your trusted tax advisor reaches out to remind you that the tax man is coming. Pittman PC is ready to help you with all of your tax preparation and planning needs. Below is a review of the landscape affecting the filing your 2014 federal taxes:
Long Term Capital Gains Rates
- 10%-15% income tax brackets? Your capital gain rate is 0%.
- 25%, 28%, 33% or 35% income tax brackets? Your capital gains rate is 15%.
- 39.6% income tax bracket? Your capital gains rate is 20%.
Social Security & Medicare Taxes Limits and Rates
The social security wage limit is $117,000 with a rate of 6.2% (both employer and employee). There is no wage base limit for Medicare. The rate is 1.45% (both employer and employee). An additional 0.9% Medicare tax is withheld from an employee (or paid if self-employed) on wages > $200,000 if single or $250,000 if married filing jointly. Two or more income sources? Please check your witholdings/estimated tax payments.
Net Investment Income Taxes
A new tax on the net investment income of individuals, estates and trusts is effective and the rate is the smaller of 3.8% of your net investment income or the excess of your modified AGI over the threshold amount for your filing status. This tax may be minimized by deferring net investment income or reducing modified adjusted gross income or both.
2014 IRA/SEP Contributions
Up to $5500 of your IRA/SEP contribution is deductible if made before the earlier of the filing of your income tax return or April 15, 2015. Age 50 or older can contribute $6,500. The number of IRA rollovers made in any one year period is limited to one. The limit applies not to each separate IRA an individual may own, but to all of his or her IRAs.
Medical & Dental Expense Thresholds
If you itemize, you may only deduct qualified medical expense that exceed 10.0% of AGI, 7.5% if you are 65 years or older.
2014 Tax Phase Outs
Personal Exemptions will increase to $3,950 but will also be reduced by 2% of each $2,500 (or any part there-of) and itemized deductions can be reduced by 3% of the amount that exceeds AGI for each filing status. The maximum phase out is 20% of itemized deductions.
Student loan interest deduction phase out: married filing jointly with AGI between $125,000 and $155,000; single filers between $60,000 and $75,000.
Mileage Rates 2014
- Business: 56.0 cents per mile
- Charitable: 14.0 cents per mile
- Medical/moving: 23.5 cents per mile
2014 Simplified Home Office Deductions
A new deduction for 2013 that was not fully utilized is the Simplified Home Office Deduction. As an alternative to allocating direct and indirect home office expenses, the IRS has provided a safe harbor allowing a deduction for the lesser of the square footage of your home office or 300 square feet multiplied by $5 a square foot.
Health Insurance – Affordable Care Act
Healthcare coverage has been mandated for Americans. Individuals and their dependents must have minimum essential coverage or pay a penalty. Some exceptions exist (i.e. coverage gap of < 3 months, household income below the filing threshold, members of certain religious sects). For lower-income individuals who obtain health insurance as individuals, a premium tax credit and cost sharing reduction may be available to help offset the costs.
We must now ask whether ALL individuals on the tax return were covered by healthcare for the entire year or partial year and must prove coverage in the form of a health insurance card, form 1095A, policy or payment information.
If you purchased coverage through the Health Insurance Marketplace, you may be receiving premium tax credits for 2014. It is important that you report changes in your income, employment, or family size, which will help you avoid getting too much or too little premium assistance in advance.
Business & Business Owners:
New IRS Rules about When to Capitalize and When to Repair
The IRS finalized regulations that determine when taxpayers should capitalize or deduct as a current expense repairs on tangible property, plus the deductibility of materials and supplies which is allowed under a de minimis rule that includes property that has an acquisition or production cost of $200 or less. Expenditures that restore the property to operation are deductible repairs. Expenditures that increase the life, utilities or worth of the property are more likely capital expenditures.
Credit for Small Employers’ Employee Health Insurance Expenses
Eligible small employers (10 or fewer FTEs paid $25K or less that offer a QHP through a Small Business Health Options Program) are allowed a credit for 50 percent of certain contributions made to purchase health insurance for their employees. The credit amount has phased out.
Planning to exit or transition your business to new ownership? Not only can tax planning be financially rewarding, but a well thought out tax plan can give you peace of mind and help you create a comprehensive, integrated strategy that addresses business financial planning, personal financial planning, management succession, an estate plan and a plan for ownership transition.
Questions about filing your 2014 taxes? Send us an email, or give us a call at 317-636-5561.