By Bert Seither, Director of Operations at Corporate Tax Network
About the author: Bert Seither is the Director of Operations at Corporate Tax Network, a national accounting and business development firm. For nearly 10 years, Seither has assisted small business owners to help put their companies on a path to prosperity.
A new year is always “happy” in the beginning, but when reality sets in that the IRS has made some changes to its tax code, this happiness level might go down a few notches. The following are some of the most noteworthy tax law changes that have already taken effect for 2014 to know about:
Newly established income tax brackets
Because of inflation and other factors, it’s only a given that the income tax brackets will change every year. The new IRS federal income tax bracket levels for 2014 are as follows:
Tax bracket: 10%
Single filers: $0 to $9,075
Married filing jointly: $0 to $18,150
Head of household: $0 to $12,950
Tax bracket: 15%
Single filers: $9,076 to $36,900
Married filing jointly: $18,151 to $73,800
Head of household: $12,951 to $49,400
Tax bracket: 25%
Single filers: $36,901 to $89,350
Married filing jointly: $73,801 to $148,850
Head of household: $49,401 to $127,550
Tax bracket: 28%
Single filers: $89,351 to $186,350
Married filing jointly: $148,851 to $226,850
Head of household: $127,551 to $206,600
Tax bracket: 33%
Single filers: $186,351 to $405,100
Married filing jointly: $226,851 to $405,100
Head of household: $206,601 to $405,100
Tax bracket: 35%
Single filers: $405,101 to $406,750
Married filing jointly: $405,101 to $457,600
Head of household: $405,101 to $432,200
Tax bracket: 39.6%
Single filers: $406,751+
Married filing jointly: $457,601+
Head of household: $432,201+
Standard deduction & personal exemption amounts for 2014
The standard deduction has increased from $6,100 to $6,200 for single tax filers in 2014. For married couples filing joint returns, it has increased from $12,200 to $12,400. For head of household filers, it is now $9,100.
As far as the 2014 personal exemption is concerned, the amount has gone up by $50 from $3,900 to $3,950.
Tax credit & deduction expirations
A wide-ranging package of 55 tax breaks expired when the calendar turned to 2014. This is because Congress did not renew them for this tax year. These tax breaks include:
- Tax breaks allowing companies to deduct research-and-development (R&D) expenses
- Sales tax deductions for taxpayers who reside in certain states
- Tax credits for companies that bring on veterans as employees
- Tax credits given for the purchase of energy-efficient items for homes & businesses
- Tax credits given for purchasing certain electric cars
- The transit parity tax break for certain commuters
- Tax breaks for teacher classroom costs
- Higher education tuition tax deductions
Other noteworthy tax law changes
- Businesses may be able to claim larger tax deductions for repairing/replacing tangible property in 2014
- New amount limits will be placed on certain charitable contributions made from IRAs.
- Same-sex couples who are legally married can now file their taxes as married filing jointly due to a Supreme Court ruling on DOMA in 2013.
- As more facets of the Affordable Care Act are implemented in 2014, new healthcare law fines could significantly affect taxpayers with no health insurance or those who have plans that fail to meet certain government guidelines.
How these tax law changes may affect you
The above IRS tax law changes and the expiration of these tax breaks will raise the tax liabilities for many individuals, small businesses, and larger corporations. While Congress has a reputation for retroactively renewing tax breaks to allow taxpayers to claim them for a certain year, these changes still leave a lot of doubt in terms of the financial future of both individuals and financially-strapped small business owners. That’s why it is important to take full advantage of any tax-saving opportunities out there, especially when there are fewer options to choose from. It’s also essential to save money and plan ahead in case of further changes this year and beyond.