What’s New – 2014

Other 2014 Tax Law Highlight or limit change

Standard Deduction and Personal exemptions: The standard amount you can deduct from income if you don’t itemize your deductions is $6,200 ($12,400 for married couples filing jointly, or $9,100 if you file as head of household). The personal exemption for 2014 is $3,950, up from $3,900. Each exemption for yourself, your spouse (if you file jointly), and your dependents reduces your taxable income by $3,950.

Alternative Minimum Tax: The Alternative Minimum Tax (AMT) exemption amount rises in 2014 to $52,800 ($82,100, for married couples filing jointly). For married individuals filing separately, the AMT exemption is $40,400. AMT relief: The exemption amount for the AMT has been increased regularly by Congress. Starting in 2012, AMT exemption amounts are tied to inflation so annual “patches” to the amount will no longer be needed

Earned income credit: If you have no children, your maximum Earned Income Credit for 2014 is $496. With two children, the maximum amount is $5,460, and with one child, it is $3,305. If you have three or more qualifying children, the maximum Credit you can receive for 2014 is $6,143 (up from $6,044 in 2013).

Social Security Wage Ceiling: The maximum amount of your earned income on which you pay Social Security tax is $117,000 for 2014. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $117,000, we will calculate a credit for any overpayment of Social Security taxes for you.

Transit and transportation fringe benefit: If your employer provides a benefit for transit passes and transportation in a commuter highway vehicle (such as a vanpool), your maximum tax-free benefit is now $130 per month for combined commuter highway vehicle transportation and transit passes; $250 per month for qualified parking or some qualified bicycle commuting reimbursement of expenses.

Foreign earned income exclusion: If you qualify, you can exclude up to $99,200 of your foreign earned income from your taxable income for 2014. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $99,200.

American opportunity tax credit: The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. Taxpayers will receive a tax credit based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, paid during the taxable year for tuition, fees and course materials. In addition, you can even get a refund if you don’t owe any tax for up to 40% of the credit ($1,000). Generally, a taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student. The credit is reduced if a taxpayer’s modified adjusted gross income exceeds those amounts. A taxpayer whose modified adjusted gross income is greater than $90,000 ($180,000 for joint filers) cannot claim the credit.

Child and dependent care credit amounts and Child tax credit: The maximum amount of child and dependent care expenses eligible for the credit is now $3,000 if you have one child, or $6,000 if you have two or more children. These increased amounts are permanent. Child tax credit has been made permanent at $1,000 per child.

Kiddie tax rules: The amount of unearned income certain children can have before they pay tax at their parents’ rates has gone up. Children can now have up to $2,000 in unearned income before they are subject to “kiddie tax” rules. Depending on the child’s age and whether he or she is a student, kiddie tax rules may apply to children up to age 23.               ..   (Continued)