It may seem difficult to believe, but with the beginning of the holiday season just weeks away, it is important for everyone to start thinking about filing their 2013 tax returns. It is important, too, for people to know about changes to the law that go into effect next year and may affect returns filed for 2014. Specifically, the Internal Revenue Service announced changes to multiple provisions made to combat inflation.
First, in the 2014 tax year, the standard deduction for single people and those who are married and filing separately will be $6,200. The standard deduction for these same individuals was $6,100 in 2013. The standard deduction in 2014 will go up to $12,400 for married couples who file jointly, up from $12,200 in 2013. No matter an individual's circumstances, it is important to speak to a tax professional about whether taking the standard deduction is a good idea. In many cases, choosing to itemize deductions can save a great deal on a yearly tax bill.
Second, important changes have been made to the earned income tax credit. For couples with three or more children who choose to file jointly, the tax credit will rise to $6,143 in 2014, up from $6,044 this year.
Third, 2014 will see an increase in the amount of allowed personal exemptions, which will go up to $3,950. The exact amount a person may take, however, depends upon his income. The personal exemption will begin to phase out for individuals with adjusted gross income greater than $254,200 and couples filing jointly with adjusted gross income greater than $305,050. The exemption phases out completely in most cases at $376,700 for individuals and $427,550 for couples who file jointly.
Fourth, there are new limits for itemized deductions. For 2014, the itemized deduction limit will begin for individuals with adjusted gross income over $254,200 and for jointly filing couples with adjusted gross income over $305,050.
Finally, there will be an increase in the estate tax exemption for 2014. In 2013, the estate tax exemption is $5,250,000 and it will increase to $5,340,000 in 2014.
Even though filing taxes for 2014 is still a long way off, it is still important to understand upcoming tax changes so that you can plan effectively. If you are currently having tax problems or anticipating trouble with the IRS, consider speaking to an experienced tax attorney, who explain your rights and help you understand your options.