Each year, there are new tax law changes that affect your federal tax bracket. These changes to the tax code could impact the rates that apply to your situation. Here's a quick breakdown of the most important changes to help you prepare your 2014 return.
The Affordable Care Act (ACA)
The Affordable Care Act (ACA), also referred to as “Obamacare,” will affect many families and individuals as they file for 2014. Several new IRS forms and instructions were added to returns involved in certain situations:
- The ACA mandates that all Americans and legal residents have health care that meets eligibility requirements. Unless you qualify for an exemption, a Penalty Fee may be assessed to your 2014 taxes if you did not have health insurance or your health plan did not meet the ACA eligibility requirements. You can check if you qualify for an exemption here.
- The ACA provided a government-backed health care exchange that offered affordable health care options to those that qualified. If you purchased health care through the Health Insurance Marketplace, the Premium Tax Credit was available to you in the form of advanced payments that could be applied to your monthly premium throughout 2014.
- If your advance payment was less than the credit, you may get the difference as a refundable credit when you file your federal return.
- If your advance was more than your credit, then you may be required to pay the difference with your tax return.
Tax Brackets, Standard Deductions, and More…
Every year, numerous tax deductions and credits expire only to be saved at the last moment by Congress. This year is no different, with Congress this month considering the extension of more than 50 deductions and credits for groups like teachers, commuters, and small business. Below are some other notable changes that we know will be in place for 2014:
- Income Tax brackets thresholds were raised, so there is a chance you may be in a different tax bracket for 2014.
- Personal exemptions were increased to $3,950.
- Standard deductions were increased based on your filing status.
- Alternative minimum tax is a system to prevent the wealthy from claiming deductions and breaks that result in them paying no taxes. Until 2014, it was “patched” annually by Congress; now it will now increase annually based on inflation. To find out if you are subject to this tax, refer to IRS Form 6251. The 2014 thresholds based on filing status are:
- Single - $52,800
- Married filing Jointly - $82,100
- Married filing Separately - $41,050
- Head of Household- $52,800
- Social Security threshold has been increased to $117,000, meaning pay above this is no longer subject to Social Security withholding.
- Retirement Contribution (IRA) deduction threshold has been increased to $70,000, meaning those who make less may be able to deduct their contributions up to $5,500.
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