IRS Unveils Tax Rules for 2014 / Deduction, Credits and Exemptions Will Rise Slightly in January

Tom Herman for the Wall St Journal writes: It's official now. The Internal Revenue Service recently announced inflation adjustments in many tax provisions for the 2014 tax year. These changes, required by law, will affect returns for 2014, to be filed in 2015. Many taxpayers may find it useful for planning purposes to know about those changes now.

Here are a few:

The basic standard deduction will increase to $12,400 for married couples filing jointly from $12,200 for 2013. It will be $6,200 for singles and married people filing separately, up from $6,100 for this year.

Nearly two-thirds of all filers typically choose the standard deduction. But before you do so, check to see if you would be better off itemizing your deductions (such as charitable gifts and interest payments) on Schedule A of Form 1040. It's tempting to choose the standard deduction since it's simpler. But you may be able to cut your tax bill by itemizing.

The maximum amount of the "earned income tax credit," designed to help the working poor, will be $6,143 for joint filers with three or more qualifying children. That's up from $6,044 for 2013. To see if you're eligible, visit irs.gov.

The personal exemption amount will be $3,950, up from $3,900 for 2013. But the amount begins to phase out once your income exceeds a certain level. For 2014, the phaseout (often known as PEP, for personal-exemption phaseout) will begin with adjusted gross income of $254,200 for most singles, or $305,050 for married couples filing jointly. It typically will phase out completely at $376,700 for singles, or $427,550 for joint filers.

Many filers also face limits on itemized-deduction amounts. Limits for the 2014 tax year will begin with adjusted gross income of $254,200 for most singles, or $305,050 for joint filers. This provision often is known in tax circles as "Pease," after a former member of Congress.

There are many other changes, including estate-tax numbers. The estate tax exemption will increase to $5,340,000 next year from $5,250,000 this year. But the annual gift-tax exclusion will remain unchanged at $14,000.