We’ve researched the web to find some major updates for federal taxes in 2014. Talk with a professional to understand how these may affect you.
The federal government has officially recognized same-sex marriages as a result of a landmark Supreme Court decision last June. While not all couples can benefit from filing a joint return, most will. Review your joint tax situations carefully, and talk with a professional about how your tax returns will change.
All high income couples need to be aware that 2014 is bringing back the marriage penalty. New taxes will be hitting those individuals earning $200,000 or more. But when you’re married, the taxes hit couples with only incomes of $250,000 or more rather than twice the single income of $400,000.
There’s also the additional 0.9% Medicare tax which may surprise some people when they prepare their tax 2013 returns. Their employer is required to start withholding this tax from payroll as soon as the employee’s wages hit $200,000. If your spouse is earning over $50,000, but less than $200,000, this extra .9% won’t be deducted from their wages. So, you’ll find yourself having to pay this tax out of pocket next year.
There’s also a higher threshold for deducting medical expenses this year. It’s 10% of adjusted gross income but still 7.5% for over 65. If you’ve already spent enough to exceed your target, look at the rest of your medical bills. A good tax tip is that when you pay with a credit card, it’s considered paid on the date of the charge. But, only do this with bills that will not be reimbursed by insurance or flexible spending accounts (FSAs).
The basic standard deduction will increase to $12,400 for married couples filing jointly from $12,200 for 2013. It will be $6,200 for singles and married people filing separately, up from $6,100 for this year.
The personal exemption amount will be $3,950, up from $3,900 for 2013. But the amount begins to phase out once your income exceeds a certain level. For 2014, the phaseout (often known as PEP, for personal-exemption phaseout) will begin with adjusted gross income of $254,200 for most singles, or $305,050 for married couples filing jointly. It typically will phase out completely at $376,700 for singles, or $427,550 for joint filers.
Have you thought about tax planning for this year yet?