10 Important Tax Changes for 2014 That Everyone Needs to Know

It’s 2014, and we’ve made it to see yet another year.  We all know that January is the beginning of what???  You guessed it…tax season.  Benjamin Franklin had a great quote, “In this world nothing is certain but death and taxes.”  He said that in the late 1700s, it’s a little morbid; but it still holds true today.

Like any other year, there were a few changes to the current tax law.  However, I just want to highlight 10 important tax changes that will likely benefit us.

1. Filing Season Delayed by 10 Days - In previous years the tax season began on January 21st.  But do you remember when the government shutdown in October for 16 days?  The shutdown delayed the tax season by 10 days.  Therefore, the IRS will not process any returns until January 31, 2014.
   You may be asking yourself, “Will we receive an extra 10 days past the April 15th deadline to file and/or pay taxes due?”  The answer to that question is “No.”  There is a statute in place that April 15th is always the tax deadline (if it is not on the weekend). 
   
   
2. Adoption Credit - In 2014, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,190 is available for qualified adoption expenses for each eligible child. 
   
3. Earned Income Tax Credit - For tax year 2014, the maximum earned income tax credit (EITC) for low and moderate income workers and working families, increases to $6,143, up from $6,044 in 2013. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children. 
   
4. Child Tax Credit - For tax year 2014, the child tax credit is $1,000 per child. 
   
5. Child and Dependent Care Credit - If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for employment, you may qualify for a credit of up to $1,050 (35 percent of $3,000) of eligible expenses in 2014. For two or more qualifying dependents, you can claim up to $2,100 (35 percent of $6,000) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income (AGI).
6. American Opportunity Tax Credit & Lifetime Learning Credits - The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return.
   
7. Interest on Educational Loans - In 2014 (as in 2013), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers).
   
8. Contribution Limits - The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $17,500. Contribution limits for SIMPLE plans remains unchanged at $12,000. The maximum compensation used to determine contributions increases to $260,000 (up $5,000 from 2013).
   
9. Saver’s Credit - In 2014, the AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low and moderate income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.
   
10. Standard Mileage Rates - The rate for business miles driven is 56 cents per mile for 2014, down from 56.5 cents per mile in 2013.

Now that you know the 10 Important Tax Changes of 2014, you're ready for tax season!  Of course contact us with any inquiries.