What are the 2014 Tax Changes?

Every year bring changes in tax laws, keeping millions of taxpayers on their toes, and 2014 is no exception. Before you get ready to file next April, it is important to make note of some key changes in these laws.

First, and foremost, tax rates have changed and caps have been raised for all but the wealthiest individuals. This means that unless your salary increases significantly in 2014, you could pay less in taxes this year.  The exception is for individuals with an income over $400,000 ($450,000 for couples filing jointly), where the tax rate has increased to 39.6%.

Other changes include a Medicare surtax for taxpayers making over $200,000 per year ($250,000 for married couples filing jointly), limitations for itemized deductions, and phase outs for personal exemptions.

Taxpayers will also be affected by the Affordable Care Act. Specifically for those taxpayers that do not have health insurance in 2014, and who do not meet certain exceptions, there will be a monthly “shared responsibility payment,” otherwise called a penalty. The penalty is the greater 1% of taxable income, or a flat fee of $95 per uninsured adult, and $47.50 per uninsured child, with a maximum of $285 per family.

Additionally, the IRS has increased the threshold for deductions for medical expenses. The percentage has increased from 7.5% of adjusted gross income to 10% of adjusted gross income.  Meaning, for someone with an adjusted gross income of $50,000, he or she must now have medical expenses exceeding $5,000 to receive the benefit of the deduction. Last year, the threshold was $3,750.

And, in 2014 the IRS will officially recognize all couples legally married under state law. In fact, the IRS will recognize same sex couples regardless of where the couple currently lives.