Top Tax Changes You Need to Know About This Year
The Affordable Care Act is the forefather of tax changes this year. In fact, this is the largest change in the tax code in the last 20 years . This is a tricky question, so let’s put it aside for now. Aside from the ACA, there are some interesting changes that may affect you when filing your 2014 tax return.
This post was originally published on the GOBankingRates website .
Pell grants, living expenses and education loans
Many students by default calculate their Pell grant funds as used to pay for the cost of qualified education because their college applies the grant to pay tuition. There is nothing wrong with that, but this amount will reduce costs that can be used to obtain an education loan such as American Opportunity Credit.
Instead, Pell grants can now be attributed to living expenses up to the full amount of actual living expenses – even if the student’s college actually applied the Pell grant to his tuition and fees. This amount will be considered taxable income, but it might be worth increasing your student loan. This complexity affects nearly 9 million students. (Note: More resources on this matter will be provided by the IRS. It is also a good idea to consult with a tax professional for your specific situation, as this can be challenging.)
Bitcoin
If you received payments in virtual currency this year, you should include its fair market value in your annual income. So yes, it is tax deductible. If you invest in or receive virtual currency as compensation for services, different calculations will apply.
Savings on health care
Flexible Health Care (FSA) accounts have traditionally been use-or-lose plans. You can save pre-tax dollars to pay for health care costs, but they must be used during the plan year. As of 2013, you can carry over $ 500 from the FSA to the next planning year. Now there is one more change.
If you have an FSA this year and carry over $ 500 or more in 2015, you will not be eligible for the 2015 Health Savings Account (HSA). Yes, all year round. This only applies to general purpose FSA and not to those that are for specific purposes, such as caring for a dependent or dental expenses.
You may need to plan ahead based on this new constraint. As noted by Kevin Martin, tax attorney at The Tax Institute at H&R Block: “If you really want to create an HSA for 2015, it might be best not to carry over these unused FSA amounts, even if that means you will lose them.”
Unemployment benefits
Being out of work is stressful both psychologically and financially. For many job seekers, unemployment benefits are a valuable bridge between their current situation and their new position. The bad news is that these benefits are taxable income. You will receive a Form W-2 and / or Form 1099-G showing the amount of benefits. Use this information to file your tax return.
In addition, a recent U.S. Supreme Court decision clarified that any additional unemployment compensation not tied to state unemployment benefits paid by a former employer to a laid-off employee will be taxed as wages and therefore social security taxes will need to be withheld from them.
IRA rollover limits since 2015
This is a tax change for 2015 – it won’t affect your 2014 profit, but it will affect your savings this year. Beginning January 1, 2015, you can only make one IRA transfer in a 12 month period. Rollover is described as withdrawing funds from one IRA, holding them for less than 60 days, and then depositing them into another IRA account.
Taxpayers can still make as many trustee-to-trustee transfers as they like throughout the year. (This means you can tell Bank A to send your IRA funds to Bank B – the money is never actually withdrawn and is in your possession.) If you transfer more than one IRA, withdrawals after the first will be taxed … you at the regular rates plus potentially 10 percent tax on early withdrawals. In addition, prohibited renewals will be subject to the usual IRA contribution limits. If the amount carried over exceeds your allowable IRA contribution, it will be considered an excess contribution and subject to an excise tax of 6 percent. Takeaway: Withdraw IRA funds with great care and attention in 2015 and beyond.
Foster family
In most cases, the phrase “foster family” conjures up the image of a child placed in temporary care with an unrelated family. While this is the correct impression, for tax purposes the definition has become slightly broader. If you provide unskilled medical support services or care for someone living in your home who has a physical, mental, or emotional problem and you receive payments from the government or a certified Medicaid provider, those payments may likely be excluded from your tax deductible. income. Even if this person is associated with you.
“This new leadership of the IRS is a complete change from its previous position,” said Lynn Ebel, tax attorney and manager of the tax institute at H&R Block. “The IRS used to tax this money received from caring for relatives because it could not meet the definition of tax-free foster care rules. Now, thanks to this new definition of the definition, taxpayers who take care of their family members can get the same duty-free treatment. “
However, as tax-free money, it is not earned income used to calculate the earned income loan.
Keeping up with Jones, or inflation
These are minor changes, but some of the major parts of tax reporting have been adjusted for inflation in 2014. You are now in the highest tax bracket at 39.6 percent if your adjusted gross income exceeds:
- $ 228,800 for separate marriage registration
- USD 406,750 per person
- USD 432,200 per head of household
- $ 457,600 if married together
Standard deduction amounts also increased slightly. Single filing, married or unmarried, currently costs $ 6,200, up $ 100 from 2013. The head of the household is $ 9,100, which is $ 150 more. Marrying jointly or eligible for a widow (widow) is $ 12,400, an increase of $ 200. They will be higher if you are over 65 or blind.
Finally, each exemption claimed in 2014 is $ 3,950, an increase of $ 50.
Extenders
55 tax credits were extended under the 2012 U.S. Tax Relief Act, which expired on December 31, 2013. This means that if you file your 2014 tax return today, you will not be able to qualify for any of these benefits. Of course, you won’t be filing your 2014 return today. It will not take place until April 15, 2015! And it is possible that Congress will decide to extend some or all of the ATRA 2012 tax breaks until then. Of the expired benefits, 12 affect individuals and 14 affect small businesses. These include:
- Higher education deduction, which allowed taxpayers to deduct $ 2,000 to $ 4,000 towards qualified tuition fees.
- Energy loans, which included home improvement loans that contributed to energy efficiency, such as heating and cooling systems, insulation and windows.
- A deduction from teacher costs, which allows teachers to claim up to $ 250 in unreimbursed classroom costs.