The IRS recently announced 2014 inflation adjustments for several key tax provisions including the following:
Income Tax
- Standard Deduction - $12,400 for married filing joint returns, $6,200 for single individuals and married filing separate, and $9,100 for head of household.
- Limitations on Itemized Deductions –itemized deductions are limited for taxpayers with incomes above $305,050 for married filing joint, $254,200 for single individuals, and $152,525 for married filing separate.
- Personal Exemption Phase-out – The phase-out reduces a taxpayer’s personal exemptions beginning with adjusted gross incomes (AGI) above $305,050 for married filing joint returns and $254,200 for individual returns. The exemption is completely phased out for AGI’s exceeding $427,550 for married filing joint and $376,700 for single individuals.
- Alternative Minimum Tax (AMT) Exemption – $82,100 for married filing joint returns, $52,800 for single individuals, and $41,050 for married filing separate.
- Kiddie Tax – The exemption for dependents unearned income will be $1,000. Under this amount a child’s unearned income will not be taxed. Additionally, a parent can elect to include a child’s gross income in the parent’s return if the child’s gross income is less than $10,000 in 2014.
Retirement Plans
- The 401(k) contribution limit will remain at $17,500 with an additional $5,500 catch-up contribution for those aged 50 and older.
- The IRA contribution limitation, including Roth contributions, remains unchanged at $5,500 plus an additional $1,000 catch-up contribution for those aged 50 and older.
- The contribution limitation for defined contribution plans, including SEP plans, will increase to $52,000 in 2014.
Estate and Gift Tax
- The unified credit against estate tax available for the estate of any decedent dying during calendar year 2014 (or available when contemplating lifetime gifts) increases to $5,340,000.
- The annual gift exclusion, which allows donors to shield gifts of a present interest from gift taxation, remains at $14,000.
These are only some of the inflation adjustments for 2014. Please consult your Zinner & Co tax advisor to learn how the above adjustments impact your situation.