The 2014 tax refund season started in late January, just in time for the roll out of the new filing regulations. Thanks to the IRS, there are a host of updated deductions, tax credits and some less than appealing increases you should be aware of.
Energy Efficiency Credits
If you’ve made improvements to your home’s energy efficiency within the last year then you may be eligible for qualifying credits. Typically 10 percent of the item’s cost or up to $200 for windows, $500 for advanced fans, $150 for heating equipment, and $300 for the portion of the property that’s been transformed into an “energy-efficient” space. Solar panels qualify for these additional credits and government rebates.
Marriage Perks
Joint Filing for Same-Sex Couples
To date, seventeen states have legalized same-sex marriage. Now, the federal tax laws have been amended to recognize this progress by allowing gay couples to file joint tax returns regardless of whether or not their state permits same-sex marriage. Better yet, these couples can amend their tax returns dating back to 2010 to file jointly. On the flip side, the joint filing could make many folks bright red targets for the marriage penalty which reduces the pool of deductions and hikes up taxes after the incomes are compounded.
Basic Standard Deduction
The basic standard deduction for married couples has been increased from $12,200 (2013) to $12,400 (2014). If you’re celebrating celibacy or just haven’t taken the plunge yet, you can expect your basic standard deduction to be $6,200.
Medical Mishap
Medical expenses can only be deducted if it exceeds 10 percent of your adjust gross income unless you’re over 65. If that’s the case, then you can go by the old rate of 7.4 percent for medical expense deductions.
It Pays to Learn
The American Opportunity Credit is available for students to cover their tuition and fees up to $2,500. Likewise, teachers can use educational deductions to write-off up to $250 in school supplies paid out of pocket. Considering teachers spend nearly twice that much annually ($485) on class supplies, it’s quite a necessary addition.
Tax Hike
Higher pay means higher taxes as of the 2014 IRS rules. Why? It’s due in part to the Medicare plan which subsidized the national insurance program used by the elderly population. The bonus .9 percent tax will be tacked on to singles that make upwards of $200,000 annually and married couples making $250,000 annually. If you’re among the top income earners, expect to face a number of tax hikes but these may be offset by the additional deductions you claim.
“A professional tax accountant will also know the most about the different tax laws and possible deductions,” says Lawrence Levy from the tax help offices of Levy and Associates. “The tax code in the United States has around 4 million words in it, making it very difficult for an individual to know everything.”
At Home Office
Prior to 2014, individuals working from home were required to itemize each one of their expenses. Now, you can claim the standard deduction of 5$ per square foot up to 300 square feet. This is bound to simplify the process for many Americans and even work to your advantage if you are employed from home.
In all, the 2014 tax season looks to be promising for students, married couples, and the elderly.
