Most taxpayers filed their income tax returns on April 15th. A number of those taxpayers are now looking forward to tax planning for 2014. Recently, the Internal Revenue Service issued a list of cost of living adjustments for various provisions in the tax code for 2014. Some of these inflation adjusted amounts are as follows:
1. The income tax standard deduction for 2014 will be $12,400.00 for married couples filing jointly, as opposed to $12,200.00 in 2013. For single filers, the standard deduction is $6,200.00, which is an increase from $6,100.00 in 2013. For heads of household, the standard deduction is now $9,100.00, which is up from $8,950.00 in 2013.
2. For 2014, the personal exemption amount is now $3,950.00, up from $3,900.00 in 2013.
3. In 2014, the amount of itemized deductions begins to phase out for certain tax payers whose income exceeds $305,050.00 for married couples filing jointly; $279,650.00 for heads of household; $254,200.00 for single individuals; and $152,525.00 for married individuals filing separately.
4. For 2014, the annual exclusion amount by which an individual can make gifts to anyone each year remains at $14,000.00 per person. In addition, the annual estate and gift tax applicable exclusion amount has been increased to $5,340,000.00 for 2014, which is up from $5,250,000.00 for 2013.
5. For 2014, the Alternative Minimum Tax (AMT) exemption for married individuals filing jointly and surviving spouses is $82,100.00, up from $80,800.00 for 2013. For married individuals filing separately, the amount is $41,050.00, which is up from $40,400.00 for 2013 and for heads of household and unmarried single individuals the exemption is $53,800.00, which is up from $51,900.00 in 2013.
6. The 2014 Social Security wage base amount which is the amount of earnings which will be subject to Social Security tax is $117,000.00, which is up from $113,700.00 for 2013.
7. For 2014, the limit on elective deferrals for employees who participate in 401(k) plans and 403(b) plans is still $17,500.00. The catch-up provision for these plans also remains unchanged at $5,500.00 for 2014. The limitation for defined contribution plans increases from $51,000.00 to $52,000.00 for 2014. The annual benefit limit for a defined benefit plan increases from $205,000.00 to $210,000.00 in 2014. In addition, the annual compensation limit increases from $255,000.00 in 2013 to $260,000.00 in 2014 for eligible employees in a qualifying plan.
Individuals should make sure that they consider all of these factors when planning their 2014 tax year and should consult their CPA and/or estate planning attorney for further guidance on these issues.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663
Phone: (330) 364-3472
Fax: (330) 602-3187