Important IRS Tax Adjustments for 2014

IRS Tax AdjustmentsThe U.S. Tax Code is often referred to as a “living document” because it is constantly growing and evolving to account for new rules, laws, and key economic indicators such as inflation. As a result, the minimum and maximum thresholds governing various reporting, contribution, and deduction guidelines are subject to change from one tax year to the next.

To keep taxpayers and professional tax preparers informed of the latest revisions, the IRS must issue a list of these annual adjustments before they go into effect. Among the more important and relevant adjustments that small business owners should be aware of for the 2014 tax year are the following:

  • The social security taxable wage limit will increase to $117,000
  • Retirees that are under the full retirement age may earn up to $15,480 without losing any SS benefits
  • The alternative minimum tax exemption will increase to $52,800 for single taxpayers and $82,100 for married couples filing jointly
  • The kiddie tax threshold, which applies to age 19 (or to age 24 in the case of full-time students) will remain at $2,000
  • The maximum first-year expensing deduction under Section 179 will decrease to $25,000, with a phase-out threshold set at $200,000
  • The standard mileage rate for business use of a vehicle will decrease to $0.56/mi
  • Health savings account (HSA) maximum contributions will increase to $3,300 for individuals; $4,300 for individuals 55 and over; and $6,550 for families
  • The maximum IRA contribution limit will remain at $5,500 for individuals and $6,500 for individuals 50 and over
  • The maximum 401(k) salary deferral amount will remain at $17,500 for individuals and $23,000 for individuals 50 and over
  • The maximum salary deferral amount for SIMPLE plans will remain at $12,000 for individuals and $14,500 for individuals 50 and over
  • The top estate tax rate will remain at 40%, but the exemption amount will increase to $5,340,000

These are just a few of the IRS adjustments you’ll need to be aware of as you plan for your 2014 individual and business tax liabilities. For a more comprehensive list of adjustments or to learn how these changes will affect your particular situation, please speak to your tax professional today.