Tax law in this country is always changing. We have compiled a list of current updates and changes to the law thus far for 2014. This list is not all inclusive, but does contain items that impact everyone.
A health reform change tops the list:
Individuals without insurance owe a tax. Although President Obama’s administration delayed the requirement that employers with 50 or more full-time workers provide employees with affordable health coverage or pay a stiff fine, the 2014 starting date for the individual mandate wasn’t deferred.
Folks must have qualifying coverage for themselves and their dependents to avoid the tax. This includes, for example, health coverage provided by an employer that meets minimum federal requirements, coverage purchased through an exchange and federal coverage such as Medicare, Medicaid, Tricare, and veterans coverage.
Individuals for whom coverage is too expensive are exempt from the tax. Employees whose share of premiums exceeds 8% of the household’s AGI won’t be hit. Ditto for people ineligible for employer coverage if the cost of a basic bronze-level plan in an exchange, less any tax credit for buying insurance, exceeds 8% of household AGI.
Also exempt: Filers without coverage for periods of less than three months.
And people who can show that a hardship forced them to go without coverage, including folks whose insurance was canceled and who can’t buy an affordable policy.
The tax for being uninsured is normally the higher of two amounts:
The basic penalty or an income-based levy.The basic penalty is $95 a person ($47.50 for each family member who is under the age of 18), with a ceiling of $285. The income-based penalty is 1% of the excess of the taxpayer’s household AGI over the minimum level of AGI needed to trigger filing a return $10,150 for singles and $20,300 for couples, plus $3,950 per dependent. The tax is lowered proportionally for any months the taxpayer had coverage. The levies will be higher in 2015 and 2016.
But in no case can the tax exceed the cost of a bronze-level exchange plan for the taxpayer and family members, also adjusted for months with health coverage.
IRS has limited remedies to collect this tax. It cannot use liens or levies, so it can only offset tax refunds. Nor can it charge interest on the unpaid balance.
Lower-incomers get a refundable tax credit to help them afford coverage. They can elect to have the credit sent directly to an exchange to help pay premiums or take the credit on their returns.The credit is allowed on a sliding scale for filers with household income over $11,490 for singles and $23,550 for a family of four. It ends as household income hits $45,960 for singles and $94,200 for a family of four.
Changes to Health Savings Accounts
The annual caps on deductible contributions to HSAs inch up this year. The ceilings rise slightly to $6,550 for account owners with family coverage and to $3,300 for self-only coverage. Folks born before 1960 can put in $1,000 more. The limits on out-of-pocket costs, such as deductibles and co-payments, will increase to $12,700 for people with family coverage and to $6,350 for individual coverage. Minimum policy deductibles will stay at $2,500 for families and $1,250 for singles.
Standard deductions for 2014 rise a bit. Marrieds get $12,400. If one spouse is age 65 or olderâ€¦$13,600. If both areâ€¦$14,800. Singles can claim $6,200 $7,750 if they’re 65. Household heads get $9,100 plus $1,550 more once they reach age 65. Blind people receive $1,200 more ($1,550 if unmarried and not a surviving spouse).
High-incomers lose their itemized deductions above a higher level for 2014. Their write-offs are slashed by 3% of the excess of AGI over $254,200 for singles. $279,650 for household heads and $305,050 for marrieds. But the total reduction can’t exceed 80% of itemizations. Medicals, investment interest, casualty losses and gambling losses (to the extent of winnings) are exemptedÂ from this cutback.
Estate and Gift Taxes
The estate and gift tax exemption for 2014 ticks upward to $5,340,000. The rate remains 40%. The gift tax exclusion stays at $14,000 per done. Up to $1,090,000 of farm or business realty can receive discount estate tax valuation.
Only $25,000 of business assets can be expensed, as the law now reads.
50% bonus depreciation has ended. Congress allowed it to lapse after 2013.
Ditto for several other business tax breaks: The work opportunity tax credit for hiring disadvantaged workers. 15-year depreciation for restaurant renovations and leasehold improvements, and the R&D tax credit.
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