Adoption Credit
In 2014, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,190 is available for qualified adoption expenses for each eligible child.
Earned Income Tax Credit
For tax year 2014, the maximum earned income tax credit (EITC) for low and moderate income workers and working families rises to $6,143, up from $6,044 in 2013. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
Child Tax Credit
For tax year 2014, the child tax credit is $1,000 per child.
Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2014. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.
Individuals - Education
American Opportunity Tax Credit and Lifetime Learning Credits
The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017 by ATRA. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return.
Interest on Educational Loans
In 2014 (as in 2013), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers).
Individuals - Retirement
Contribution Limits
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $17,500. Contribution limits for SIMPLE plans remains unchanged at $12,000. The maximum compensation used to determine contributions increases to $260,000 (up $5,000 from 2013).
Income Phase-out Ranges
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $60,000 and $70,000, up from $59,000 and $69,000 in 2013.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range is $96,000 to $116,000, up from $95,000 to $115,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple's modified AGI is between $181,000 and $191,000, up from $178,000 and $188,000.
The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000.
Saver's Credit
In 2014, the AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low and moderate income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.
Businesses - Standard Mileage Rates
The rate for business miles driven is 56 cents per mile for 2014, down from 56.5 cents per mile in 2013.
Section 179 Expensing
For 2014 the maximum Section 179 expense deduction for equipment purchases decreases to $25,000 of the first $200,000 of business property placed in service during 2014. The bonus depreciation of 50 percent is gone, as is the accelerated deduction, where businesses can expense the entire cost of qualified real property in the year of purchase.
Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, in 2014 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $130 down from $245 in 2013. The monthly limitation for qualified parking is $250.
While this checklist outlines important tax changes for 2014, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us if you want to get an early start on tax planning for 2014. We're here to help! For no obligation free consultation contact us today!
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