By Bert Seither
Bert Seither is the Vice President for 1800Accountant, the nation’s leading accounting and consulting firm for small businesses and entrepreneurs. For over a decade, Seither has assisted thousands of small business owners by helping them achieve financial freedom.
When New Year’s Day rolls around each year, there are generally some noteworthy changes to aspects of the U.S. federal tax code. The IRS and the federal government make rulings on tax-related matters each year, and many of these changes have a direct impact on nearly all taxpayers. These are a few of the most significant tax law changes you should be aware of for the year 2014:
Expiration of tax credits & tax deductions
There were 55 tax breaks that expired on Jan. 1, 2014. Some of these breaks included:
– A sales tax deduction for residents of certain states.
– A deduction on research and development (R&D) costs for certain businesses.
– Business tax credits for hiring veterans.
– Tax credits on buying certain energy-efficient items and vehicles.
– A transit parity tax break.
– Deductions for teachers on costs of classroom items.
– Higher education tuition tax deductions.
Other noteworthy tax law changes
In addition to these expired tax breaks, you should also know about these new changes:
– There are some new limits on specific IRA contributions to charities.
– Businesses can now claim larger deductions on repairing and replacing certain property.
– Same-sex couples who are legally married now have the option to file taxes with the IRS as married filing jointly.
– Through the gradual implementation of the Affordable Care Act, fines may be levied on taxpayers who do not have health insurance.
– The standard mileage rate for deducting fuel costs is 56 cents per mile for 2014, down from 56.5 cents last year.
Modified 2014 Income tax brackets
The IRS typically modifies its income tax brackets on an annual basis to adjust for inflation and other economic-related factors. These are the income tax brackets for 2014:
Tax bracket: 10%
Single filers: $0 to $9,075
Married filing jointly: $0 to $18,150
Head of household: $0 to $12,950
Tax bracket: 15%
Single filers: $9,076 to $36,900
Married filing jointly: $18,151 to $73,800
Head of household: $12,951 to $49,400
Tax bracket: 25%
Single filers: $36,901 to $89,350
Married filing jointly: $73,801 to $148,850
Head of household: $49,401 to $127,550
Tax bracket: 28%
Single filers: $89,351 to $186,350
Married filing jointly: $148,851 to $226,850
Head of household: $127,551 to $206,600
Tax bracket: 33%
Single filers: $186,351 to $405,100
Married filing jointly: $226,851 to $405,100
Head of household: $206,601 to $405,100
Tax bracket: 35%
Single filers: $405,101 to $406,750
Married filing jointly: $405,101 to $457,600
Head of household: $405,101 to $432,200
Tax bracket: 39.6%
Single filers: $406,751+
Married filing jointly: $457,601+
Head of household: $432,201+
2014 standard deduction and personal exemptions
The standard deduction went up from $6,100 in 2013 to $6,200 in 2014 for single filers. For married couples who file a joint return, it increased from $12,200 to $12,400. For head of household filers, it now stands at $9,100.
The personal exemption went up slightly from $3,900 in 2013 to $3,950 in 2014.