There are not very many tax changes for the year of 2014. However, these changes can have big impacts on the persons and families they affect. Remember to keep in mind these modifications to the federal income tax when filing this year.
New Tax Brackets
Income tax brackets have changed, and for the most part for the better. The caps for each bracket have been raised, so if your income hasn't increased significantly, you may fall into a lower bracket than when you filed last year.
Same Sex Marriage
New this year, married same-sex couples may file a joint federal tax filing similar to heterosexual couples. After the Supreme Court struck down the Defense of Marriage Act, the IRS instructed same-sex married couples to file jointly or as a married couple filing separately, even if the state where they live does not recognize their marriage. This will simplify the federal filings of same-sex couples. However, if these individuals must pay state income taxes, depending on their state's laws, same-sex couples may still have to file two state returns as single separate taxpayers.
Affordable Care Act
The Affordable Care Act continues in 2014 which means you will need to ensure you have medical insurance. Open enrollment does last until March 31st, 2014, so you will need to ensure you are enrolled before the open enrollment is closed for the remainder of the year to ensure you and your family do not face penalties. If you so choose not to purchase medical insurance, whether it be from the healthcare exchange or from an employee exchange, the first year penalty will either be 1% of your income or $95 per uninsured adult in your household and $47.50 per uninsured child in your household with a cap of $285 per family, whichever amount is greater. These penalties will increase from year to year of no medical coverage. Furthermore, if you choose to ignore the bill from the IRS for the medical insurance penalty, the IRS will take the amount from your future income tax refunds.
Home Office Deduction
If you are running a business from home, you should take advantage of the new simplified tax deduction for home offices. The new option is $5 per square foot of home office workspace with a maximum of 300 square feet to claim. Ensure you use a Schedule C and note the instructions carefully to ensure credit is given and red flags are not raised.
Energy- Efficient Improvements
If you made energy-efficient improvements to your home in 2013, you may qualify for an energy credit of up to $500 for certain energy-saving improvements to your principal residence. Be aware that this deduction depends on the type of home improvement that was made. Limits include:
- $150 for any qualified natural gas, propane, or oil furnace or hot water boiler
- $50 for any advanced main air circulating fan
- $200 for energy-efficient windows
- $300 for an item of energy-efficient building property
Higher-Income Taxpayers
If you happen to have a relatively high income, it is likely to mean higher taxes. if your income is over $400,000 for single filers, $450,000 for married couples, or $425,000 for heads of household, you will have a top marginal tax rate of 39.6%. Higher-income taxpayers may also see fewer deductions and personal exemptions, as well as an increase in capital gains taxes. There is also a new Net Investment Tax also known as Medicare Surtax, that applies to singles making over $200,000 and heads of household making over $250,000. this surtax is an additional 0.9% tax.
