What's New for Federal Income Taxes 2014?

Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) — The Internal Revenue Service has announced many of the annual inflation adjustments to deductions, credits, phase-outs and rates for 2014.

Unless Congress changes the Tax Code, the following numbers apply for 2014 returns to be filed in 2015.

THE STANDARD DEDUCTION

  • Single/Married Filing Separate = $6,200
  • Married/Qualifying Widow(er) = $12,400
  • Head of Household = $9,100

The Standard Deduction for a dependent is the greater of (1) $1,000, or (2) the sum of $350 and the individual's earned income (up to $6,200).

The additional Standard Deduction amount for the age 65 or older or blind is $1,200 for married individuals and $1,550 for Single and Head of Household.

PERSONAL EXEMPTION

The personal exemption is $3,950.

THE PEP REDUCTION OF PERSONAL EXEMPTIONS

Personal exemptions are reduced by 2% for each $2,500 ($1,250 if Married Filing Separate), or portion thereof, that a taxpayer's Adjusted Gross Income (AGI) exceeds $254,200 for Single filers, $279,650 for Head of Household, $305,050 for Married Filing Joint or Qualifying Widow(er), and $152,525 for Married Filing Separate. Personal exemptions are totally phased out at AGIs of $376,700 for Single, $402,150 for Head of Household, $427,550 for Married Filing Joint or Qualifying Widow(er), and $213,775 for Married Filing Separate.

LONG-TERM CARE INSURANCE PREMIUM AGE-BASED DEDUCTION LIMITS

  • Age 40 or less = $370
  • Age 41-50 = $700
  • Age 51-60 = $1,400
  • Age 61-70 = $3,720
  • Age 71 + older = $4,660

THE PEASE REDUCTION OF ITEMIZED DEDUCTIONS

Itemized deductions are reduced by 3% of the amount a taxpayer's AGI exceeds $254,200 for Single filers, $279,650 for Head of Household, $305,050 for Married Filing Joint, and $152,525 for Married Filing Separate. The reduction cannot exceed 80% of total itemized deductions (not including any deductions for medical expenses, investment interest, and casualty, theft, or gambling losses).

CONTRIBUTION LIMITS FOR TAX-DEFERRED PENSION PLANS

  • IRA = $5,500
  • IRA Catch-Up Contributions at age 50 and older = $1,000
  • SIMPLE Plan = $12,000
  • SIMPLE Catch-Up Contributions at age 50 and older = $2,500
  • 401(k), 403(b), 457, and federal Thrift Savings Plan = $17,500
  • 401(k), 403(b), 457, and federal Thrift Savings Plan Catch-Up Contributions at age 50 and older = $5,500

Please note that these numbers are the same as were in effect for 2013.

The deduction for contributions to a traditional IRA by taxpayers who are active participants in a workplace retirement plan is phased out for Single and Head of Household filers with AGI between $60,000 and $70,000 and for those who are Married Filing Joint and Qualifying Widow(er) with AGI of $96,000 to $116,000.

The deduction on a joint return for a spouse that is not an active participant in an employer plan but who is married to one who is phases out at AGI of $181,000 to $191.000.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $114,000 to $129,000 for Single and Head of Household filers and $181,000 to $191,000 for Married Filing Joint and Qualifying Widow(er).

See the tax rate schedules HERE!

THE ALTERNATIVE MINIMUM TAX

The AMT exemption amount is –

  • $52,800 - Single and Head of Household
  • $82,100 - Married Filing Joint and Qualifying Widow(er)
  • $41,050 - Married Filing Separate

The AMT exemption is reduced as Alternative Minimum Taxable Income exceeds –

  • $117,300 – Single and Head of Household
  • $156,500 – Married Filing Joint and Qualifying Widow(er)
  • $ 78,250 – Married Filing Separately

The 28% AMT tax rate kicks in at AMT net taxable income (after the exemption allowed) of $182,500 ($91,250 for Married Filing Separate).

SOCIAL SECURITY WAGE BASE

The maximum amount of wages subject to the Social Security tax is $ 117,000. The maximum Social Security tax withholding is $7,254..

ESTATE AND GIFT TAXES

The Estate Tax and Gift Tax exemption is $5,340,000. The annual Gift Tax exclusion remains at $14,000.

--Written by Robert D. Flach for MainStreet

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