As the ever-changing tax law begins to take form in advance of the 2014 tax season, now is the time to start anticipating what your 2014 tax return will look like. After all, in only a few short months it will be time to start preparing it.
Just like previous years, there are a number of tax law changes to be aware of when you sit down to work on your 2014 tax return. Here are some of the highlights.
- The Standard Deduction is changing. Married couples will now receive $12,400 instead of $12,200. Singles will receive $6,200 as opposed to $6,100.
- Personal Exemptions are increasing. Individuals and dependents will now receive $3,950 instead of $3,900. This deduction, however, is phased out for higher income earners.
- The Social Security Wage Base is changing. This means that you will now pay social security on up to $117,000 of your wages – an increase of $3,300 over the 2013 rates. The tax rate will remain at 6.2 percent for employees and employers. The 1.45 percent Medicare tax will remain unchanged from last year.
- Social Security Benefits will increase. Anyone receiving social security benefits can expect a 1.5 percent increase in benefits due to inflation.
- HSA Limits are increasing. If you contribute to a health savings account, you can now put away $6,550 if you have family coverage or $3,300 for self-only coverage. If you are 55 or older, you may contribute an additional $1,000.
- IRA Contribution Limits Remain Unchanged, but Income Levels for Deductible Contributions are Different. The maximum you can put into your IRA is still $5,500, but you cannot deduct a traditional IRA contribution if your adjusted gross income exceeds $70,000 if you are single, $191,000 if you are married (filing jointly) and only one spouse is active, or $116,000 if both spouses are active. If you contribute to a Roth IRA and are married (filing jointly), your adjusted gross income cannot exceed $191,000. If you’re single, your adjusted gross income cannot exceed $129,000. If you file under the “married filing separate” status, you will most likely not be eligible for an IRA benefit unless you contribute to a non-deductible IRA and convert it to a Roth IRA. (This strategy may be useful for high income earners.) Email a dental CPA at Rea & Associates to find out how this strategy may help you.
- SEP Contribution Limits are increasing. You can now contribute the lesser amount of either 20 percent of your net self-employment income or $52,000, which is up from last year’s $51,000 limit.
- Standard Mileage rates have decreased. The reimbursement rate is now $0.56 per mile, which is down from $0.565 per mile in 2013. Charitable mileage rates remain constant at $0.14 per mile, while medical and moving mileage rates are down from $0.24 to $0.235 per mile.
- The Estate and Gift Tax Exemptions are increasing. In 2013, this exemption was $5.25 million. It will be $5.34 million in 2014. The top tax rate will remain at 40 percent on estates, and gifts are still allowed up to $14,000 per year to an individual without the need to file a gift tax return. If you are married, the gifting limit doubles to $28,000 per year without the responsibility of filing a gift tax return.
- Bonus Depreciation has ended (for now). Under the current law, bonus depreciation is not allowed for 2014. In 2013, you could take 50 percent bonus depreciation on certain assets purchased. However, it is, possible that Congress will retroactively extend the tax benefit for the entire 2014 tax year. Section 179 depreciation limits are currently set at $25,000 for 2014, but are also subject to change.
Contact Our Dental Practice Professionals
Email a dental CPA at Rea & Associates for regular updates and guidance on these changes, as well as any other tax law changes that may affect your 2014 tax return.
By Alan Hill, CPA (Mentor office)