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2014 Inflation Adjustments and Other Tax Changes

Carolyn A. Hegge

January 3, 2014

The IRS has announced the annual inflation adjustments for the 2014 tax year as well as other 2014 tax changes resulting from recently passed legislation. The following table gives you a general overview of the 2014 adjustments and changes. As always, you should consult your own tax advisor for information and advice on how these rates and changes apply to your specific situation.

 

 Gift Tax  2014  2013
Annual gift tax exclusion (per recipient other than a spouse) $14,000 $14,000
Annual gift tax exclusion for gifts to a spouse who is US citizen Unlimited Unlimited
Annual gift tax exclusion for gifts to a spouse who is not a US citizen $145,000 $143,000
     
 Estate Tax  2014  2013
Federal estate tax exemption amount $5,340,000 $5,250,000
Maximum federal estate tax rate 40% 40%
     
 IRAs-Roth and Traditional  2014  2013
IRA contribution limit (not to exceed 100% of earned income) $5,500 $5,500
IRA catch-up contributions (not to exceed to 100% of earned income) for account owners age 50 or older $1,000 $1,000
 
 Income Limits for Contributing to a Roth IRA  2014  2013
Limitation on ROTH IRA contributions by married couples and surviving spouses filing joint returns Begins at AGI of $181,000 Begins at AGI of $178,000
Limitation on ROTH IRA contributions by unmarried individuals and heads of households Begins at AGI of $114,000 Begins at AGI of $112,000
Limitation on ROTH IRA contributions by married individuals filing separate returns Begins at AGI of $-0- Begins at AGI of $-0-
     
 Deduction Phase-Out for Traditional IRAs  2014  2013
Married couple filing joint returns where the IRA contributor is covered by a workplace retirement plan AGI between $96,000 and $116,000 AGI between $95,000 and $115,000
Married couple filing joint returns where the IRA contributor is not covered by a workplace retirement plan but the spouse is covered AGI between $181,000 and $191,000 AGI between $178,000 and $188,000
Unmarried individuals and heads of households covered by a workplace retirement plan AGI between  of $60,000 and $70,000 AGI between $59,000 and $69,000
Married individual covered by a workplace retirement plan and filing a separate return AGI between   $0 and $10,000 AGI between $0 and $10,000
     
 401(k), 403(b), Profit-Sharing Plan Limits  2014  2013
Maximum annual compensation amount taken into account when determining employer and employee contributions $260,000 $255,000
Elective deferrals for traditional and safe harbor 401(k) plans and for 403(b) plans $17,500 $17,500
Elective deferrals for SIMPLE 401(k) plans $12,000 $12,000
Catch-up contributions for traditional 401(k) plans, safe harbor 401(k) plans, and 403(b) plans for employees age 50 or older $5,500 $5,500
Catch-up contributions for SIMPLE 401(k) plans for employees age 50 or older $2,500 $2,500
Total annual contribution limit for all accounts maintained by one employer (not to exceed 100% of compensation) $52,000 (plus catch-up contributions for employees 50 or older) $51,000 (plus catch-up contributions for employees 50 or older)
     
 Income Tax-Standard Deduction  2014  2013
Standard deduction for unmarried individuals and for married individuals filing separately $6,200 $6,100
Standard deduction for married couples filing joint returns $12,400 $12,200
Standard deduction for heads of households $9,100 $8,950
     
 Income Tax-Itemized Deductions  2014  2013
Itemized deduction limitation for unmarried individuals (other than surviving spouses or heads of households) Begins at AGI of $254,200 Begins at AGI of $250,000
Itemized deduction limitation for married couples and surviving spouses filing joint returns Begins at AGI of $305,050 Begins at AGI of $300,000
Itemized deduction limitation for heads of households Begins at AGI of $279,650 Begins at AGI of $275,000
Itemized deduction limitation for married individuals filing  separate returns Begins at AGI of $152,525 Begins at AGI of $150,000
     
 Income Tax-Personal Exemption  2014  2013
Personal exemption amount $3,950 $3,900
Phase out of personal exemption for unmarried individuals (other than surviving spouses and heads of households)  

AGI between $254,200 and $376,700

 

AGI between $250,000 and $372,500

Phase out of personal exemption for married couples and surviving spouses filing joint returns  

AGI between $305,050 and $427,550

 

AGI between $300,000 and $422,500

Phase out of personal exemption for heads of households  

AGI between $279,650 and$402,150

 

AGI between $275,000 and $397,500

Phase out of personal exemption for married individuals filing separate returns  

AGI between $152,525 and $213,775

 

AGI between $150,000 and $211,250

     
 Employer Sponsored Flex Plans  2014  2013
Annual limit on employee contributions to employer-sponsored healthcare flexible spending arrangements $2,500 $2,500
     
 Domestic Employees-Social Security and Medicare  2014  2013
Threshold wage amount for withholding Social Security (FICA) and Medicare taxes from cash wages paid to child care, house cleaning, etc. employees who are over 18 and not members of the employer’s immediate family, and threshold wage amount for the employer to be required pay its portion of such taxes $1,900 $1,800
Social Security Tax to be withheld from each employee’s wages 6.2% of the first $117,000 of wages 6.2% of the first $113,700 of wages
Medicare Tax to be withheld from each employee’s wages 1.45% of wages 1.45% of wages
Additional Medicare Tax to be withheld from wages of unmarried employees 0.9% of wages in excess of $200,000  

0.9% of wages in excess of $200,000

Additional Medicare Tax to be withheld from wages of married employees who file joint returns 0.9% of wages in excess of $250,000  

0.9% of wages in excess of $250,000

Additional Medicare Tax to be withheld from wages of married employees who file separate returns 0.9% of wages in excess of $125,000  

0.9% of wages in excess of $125,000

Employer’s portion of Social Security Tax Amount equal to 6.2% of the first $117,000 of employee’s wages Amount equal to 6.2% of the first $113,700 of employee’s wages
Employer’s portion of Medicare Tax Amount equal to 1.45% of  employee’s wages Amount equal to 1.45% of  employee’s wages
Employer’s share of Additional Medicare Tax -0- -0-
     
 Standard Mileage Rates for Computing Deductible Costs of Operating Automobiles for Business, Medical, Moving and Charitable Purposes  2014  2013
Miles driven for business $.56/mile $.565/mile
Miles driven for medical or moving purposes $.235/mile $.24/mile
Miles driven in service of charitable organizations $.14/mile $.14/mile

 

Sources:  Rev. Proc. 2013-35; IR-2013-86; IR-2013-87; IR-2013-95; IR-2013-4; IR-2012-95; Rev. Proc. 2013-15; IRS Topic 756; COLA Increases for Dollar Limitations on Benefits and Contributions.

If you have any questions about how the information in this article may affect you or your business, please contact Carolyn A. Hegge at chegge@stroudlaw.com or (608) 257‑2281 or your Stroud attorney.


 

DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.