What’s New – 2014

For Homeowner: Mortgage insurance premiums- If you pay mortgage insurance premiums, also known as private mortgage insurance (PMI), you may not be able to deduct the premiums as mortgage interest in 2014. Forgiven debt: Forgiven debt is normally taxable income – even if the debt is from losing your underwater home by foreclosure or short sale. With the discharge of qualified principal residence exclusion, however, you generally don’t have to pay tax on the difference between your mortgage balance and the amount of money the bank receives from the sale of the home in 2013, but this exclusion expired in 2013.

Home office deduction: This remain no change in 2014. For those home-based business owners, claiming a deduction used to require business owners to take precise measurements of the space they operated their business out of, perform complex calculations. For 2013, the IRS only requires that a person claiming a home office deduction (having fulfilled the regular and extensive use and principal place of your business requirements) multiply the square-footage of their home office by $5 – the maximum deduction is $1,500

Standard mileage rate: For 2014: The standard mileage rates for the use of your car or other vehicle is 56 cents per mile for business, 23.5 cents per mile driven for medical or moving purposes which dropped half a cent from 2013, and 14 cents per mile for charitable travel which is the same as 2013.

Roth IRA contribution limit: If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2014 and 2013 will generally be the lesser of: $5,500 or your taxable compensation for the year. IF you were age 50 or older before 2015, you are able to contribute $1,000 more. However, for 2014 if your modified adjusted gross income (AGI) is >= $114,000 but < $129,000 (filing status is single, head of household or married filing separately, your Roth IRA contribution limit is reduce (phase out) and will reduce to zero if AGI >= $129,000. If your modified adjusted gross income (AGI) is >= $181,000 but < $191,000 (filing status is married filing jointly or qualifying widow(er), your Roth IRA contribution limit is reduce (phase out) and will reduce to zero if AGI >= $191,000. If you are married filing separately, other limit is applied.

 IRA to charity exclusion: The IRA qualified charitable distribution (QCD) provision has been extended. If you are age 70 ½ or older, this exclusion allows you to make direct distributions from your traditional IRA to a charity without recognizing the distribution as income. (You cannot take a charitable deduction.)

Estate tax, Gift tax and General-skipping transfer (GST) tax’s exclusion amount: The federal estate tax will be imposed on estates that exceed $5,340,000 up from $5,250,000 in 2013. The federal gift tax will be integrated with the estate tax the exclusion amount for 2014 is $5,340,000 too. For GST tax, the indexed exclusion amount for 2014 is $5,340,000. Beginning January 1, 2011, estate of decedents survived by a spouse may elect to pass any of the decedent’s unused exclusion to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse.

 Annual Gift exclusion: The annual exclusion from the gift tax for 2014 is $14,000, same as 2013.

Estate tax, Gift tax and GST Exclusions history:

  • The annual exclusion for gifts is $11,000 (2004-2005), $12,000 (2006-2008), $13,000 ( 2009-2012) and $14,000 (2013-2014).
  • The applicable exclusion amount is increased to $5,000,000 for estates of decedents dying on or after December 31, 2009.
  • The applicable exclusion amount for gifts is $1,000,000 (2010), $5,000,000 (2011), $5,120,000 (2012), $5,250,000 (2013) and $5,340,000 (2014).