Tax Update News for 2014

By: lauras119 Thursday January 2, 2014 comments

Dear Clients and Friends,

I attended several tax update seminars in the last few months and gained knowledge that will definitely benefit you! Of course, you can call me for more information about these tax updates.

New Tax Items:

  • A new tax bracket (39.6%)was added for individuals with a net income of $400,000

  • The new 39.6% tax bracket will rise to 20% (formerly 15%) for long-term capital gains and dividends

  • Two new Medicare taxes that will be effective for 2013:

    • Individuals with income over $200,000 will have a 3.8% tax on net investments income (dividends, interest, annuities and capital gains)

      • NOTE:  Most Rental activities are NOT subject to this sur-tax, even the SALE of a rental home is not subject to the 3.8% Medicare tax!

    • An additional .9% tax will be applied for individuals who receive $200,000 income from self-employment

  • Medical deductions are now subject to 10% of income (verses 7.5% )\

    • Exception:  Those over 65 years old, can still use the 7.5% rate!

  • Leasehold improvements made can be depreciated over a 15-year period (rather than a 39-year period).

  • There are new tax rates (0%, 15%, 20%and 3.8%) that are significant this year for long-term capital gains.

  • IRA contribution deferral is the lower of your earned income or $5,500 if under 50.

  • 401K contribution deferral is $17,500 if under 50.  Add $5500 if you are over 50.

  • There are new rules that allow you to convert your traditional IRA to a ROTH IRA, if you pay taxes on your IRA today (at lower tax rates), when you retire, the distributions as well as the gains in the fund are not taxed when withdrawn.

  • SEP, Pension Plans, and Profit Sharing Plans contribution limits are the lessor 25% of compensation, (or 20% of net income if self-employed) or $51,000.

Extended from Prior Years

  • Tax brackets (10%, 15%, 25%, 28%, 33% and 35%).

  • Tax-free capital gains and dividends have retained and made permanent for the lowest 10% and 15% tax bracket.

  • Tax breaks for college tuition, student loan interest, adoptions, mortgage insurance, dependent care credit and forgiven mortgage debt.

  • The Relief Act was extended through the end of 2013.

  • A long term benefit for taxpayers in the 10% tax bracket would be the conversion of all or part of a traditional IRA to a ROTH IRA.


  • 701/2 years old taxpayers can make a charitable donation directly from their IRA. This distribution does not have to be reported as income.

  • Child Tax Credit stays at $1000 per child under 17.

  • The phase-out of itemized deductions and personal exemptions has returned.  If your income is over $250,000 (single) or $300,000 (married)

Things to Watch Out for in 2014:

  • Depreciation:  Section 179 is limited to $25,000 (rather than $500,000)

*congress MAY change this

  • Mileage rate for 2014 was lowered to 56 cents per mile (verses 56.5 cents in 2013) for business activity.

  • Mileage rate for Moving or Medical is 23.5 cent per mile.

  • Mileage rate for Charitable activity is 14 cents per mile

  • Energy credits have now expired

Other Notable Notes:

  • "Taxpayer relief act" , really means relieving your money out of your pocket.  Seriously though, Tax Planning is as critical as ever!

  • 10,000 people turn 65 every day which results in HUGE tax issues.

  • The Affordable Health Care Act now requires everyone to have Health Insurance, or pay a fine. The fines are not imposed until the 2014 income tax returns.  You have until March 30th to sign to obtain health insurance, or pay the fine.

  • IRS has hired 16,000 new audit agents just to cover Obama Care issues.

  • Tax software costs, as well as IRS expenses will skyrocket due to the complex calculations of the Affordable Care Act.

  • IRS audit odds are increasing, from 1 in 200 to 1 in 100 returns in 2012.  But your chance of getting audited is still minimal.  Don't take low audit rates as invitation to cheat though.  However, don't let the fear of an audit stop you from taking every deduction you are entitled to.

This is just a handful of new information that I learned. I would love to share more that relates specifically to your situation.

Call me today @ 970--215-5901!


About the Author: lauras119


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