The IRS has announced inflation adjusted tax brackets and standard deduction amounts for tax year 2014, effective 1 January, 2015. These are the numbers that you will have to use to prepare your 2014 tax returns in 2015.
Standard deductions for 2014
The standard deductions are now $6,200 for single taxpayers and married taxpayers who file separately. It has increased by hundred dollars from 2013. For married couples filing jointly, the standard deduction is $12,400, and $ 9,100 for the heads of households.
The limitation for all itemized deductions that are claimed on individual tax returns for the year 2014 starts with $254,200 for single taxpayers and $305,050 for married couples who file jointly. The limitations were supposed to be eliminated in 2010, but were extended till 2012. They were then brought back in 2013, indexed for inflation.
In 2014, the personal exception amount is $3,950. The personal exemptions phase off completely for individual taxpayers at $376,700 and for married couples filing jointly at $427,550.
Earned Income Tax credit
The maximum EIT amount for the year 2014 is $3,304 for married couples filing jointly and who have one child. The amount is $5,460 if you have two children; $6,143 if you have three or more children. You also get an earned income tax credit of $496 if you do not have any children.
Alternative Minimum Tax exemptions
The AMT exemption is $52,800 for individual taxpayers. For married couples filing jointly, the amount is $82,100. The AMT is permanently adjusted for inflation.
The credit that is allowed for adopting a child with special needs is at $13,190. The amount of credit that is allowed for other types of adoptions include expenses up to $13,190.
Child tax credit
For the tax year 2014, $3,000 is the amount of credit that may be refundable as Child tax credit.
The amount of money that a child can take home without attracting federal income tax is $1,000.
Hope scholarship credit
For the tax year 2014, $2,500 is the maximum amount of Hope scholarship credit. You can claim 100% of qualified expenses including tuition up to $2,000 plus 25% of expenses above $2,000 but less than $4,000.
Individual retirement account contributions
IRA contributions can be deducted up to $5,500 for the tax year 2014.
Flexible spending accounts (FSA)
Employee contributions up to $2,500 to employer-sponsored healthcare FSAs are deductible.
Federal gift tax inclusion
You can deduct gifts of up to $ 14,000 for 2014.
Federal estate tax exemption
For those who die in 2014, and estate value of up to $5,340,000 is exempt.
If you want more information on deductions and tax brackets, you can find them at the revenue procedure update that the IRS has posted. Consider using the services of a qualified accountant to file your paperwork accurately and to save the maximum amount in taxes.