Terri Eyden for AccountingWeb writes: For tax year 2014, the IRS announced October 31, 2013, annual
inflation adjustments for more than forty tax provisions, including the
tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.
The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts:
1. The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33, and 35 percent – and the related income tax thresholds are described in the revenue procedure.
2. The standard deduction rises
to $6,200 for singles and married persons filing separate returns and
$12,400 for married couples filing jointly, up from $6,100 and $12,200,
respectively, for tax year 2013. The standard deduction for heads of
household rises to $9,100, up from $8,950.
3. The limitation for itemized
deductions claimed on tax year 2014 returns of individuals begins with
incomes of $254,200 or more ($305,050 for married couples filing
jointly).
4. The personal exemption rises
to $3,950, up from the 2013 exemption of $3,900. However, the exemption
is subject to a phase-out that begins with adjusted gross incomes of
$254,200 ($305,050 for married couples filing jointly). It phases out
completely at $376,700 ($427,550 for married couples filing jointly.)
5. The Alternative Minimum Tax
exemption amount for tax year 2014 is $52,800 ($82,100, for married
couples filing jointly). The 2013 exemption amount was $51,900 ($80,800
for married couples filing jointly).
6. The maximum Earned Income
Credit amount is $6,143 for taxpayers filing jointly who have three or
more qualifying children, up from a total of $6,044 for tax year 2013.
The revenue procedure has a table providing maximum credit amounts for
other categories, income thresholds and phase-outs.
7. Estates of decedents who die
during 2014 have a basic exclusion amount of $5,340,000, up from a
total of $5,250,000 for estates of decedents who died in 2013.
8. The annual exclusion for gifts remains at $14,000 for 2014.
9. The annual dollar limit on
employee contributions to employer-sponsored health care flexible
spending arrangements (FSA) remains unchanged at $2,500.
10. The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
11. The small employer health
insurance credit provides that the maximum credit is phased out based on
the employer's number of full-time equivalent employees in excess of
ten and the employer's average annual wages in excess of $25,400 for tax
year 2014, up from $25,000 for 2013.
Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2013-35, which will be published in Internal Revenue Bulletin 2013-47 on November 18, 2013.
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