Tag Archives: Adjusted gross income

Optimize Savings On Your 2014 Tax Return

It’s always difficult to be caught up in a mad rush at the end of the tax season to get your federal taxes filed on-time. Filing at the last minute is bound to be particularly stressful this year due to the scaled back phone support from the IRS and the additional requirements set by the Affordable Care Act. Here are some tax changes to take note of now so you are not surprised down the stretch.

Tax Breaks

Sales tax can be deducted once again thanks to the last minute efforts in Congress. The primary beneficiaries of this measure are resident of states that have no income tax, as well as those living in states will considerably low income taxes. There is an IRS Sales Tax Deduction Calculator online to help assess the amount covered.

2014 Tax ReturnMortgage insurance premiums may also be deducted in some cases. Only people with a 2014 gross income that is less than $109,000 and who took out the loan after 2006 are eligible for the tax break. Programs like TurboTax Online will make the calculation for you automatically when you enter your income and your mortgage insurance paid.

Seniors are also going to get a couple additional breaks this year thanks to Congress. Those who are 70 and a half years of age may transfer as much as $100,000 from their individual retirement account (IRA) to a qualified charity. This will not be included in the gross income but instead count as the required minimum distribution. This may reduce taxes on Social Security benefits and avoid the Medicare high income surcharge.

Note that these tax breaks are only for the 2014 tax return. Congress has not made them permanent and the changing political landscape is likely to affect their renewal for the following year. Make sure to check several online tax resources next tax season to make sure they were renewed again.

Investment Income Tax

Single taxpayers with adjusted gross incomes in excess of $200,000 and married taxpayers with $250,000 or more may have to pay 3.8% surtax on their investments. Tax-exempt interest is not covered by the surtax.

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What Does Obamacare Mean For Your Tax Future?

Obamacare TaxesThe implementation of the Affordable Care Act continues to move forward. Failing to adjust withholding strategies and medical expenditures may result in added tax liability. What do the increased cost of healthcare and decreased deductions mean for you and your family? Here are some of the most significant changes to tax laws under the Affordable Care Act.

Higher Taxes on Investment Income

If you derive a significant percentage of your income from investments, you can expect somewhat higher taxes for the 2013 fiscal year. This typically applies to individuals who earn more than $200,000 and married couples who make over $250,000 jointly. Most other investors and taxpayers will see little or no change in the rate of taxation for their income-producing investments.

Upper Income Brackets Will See Medicare Tax Increases

Payroll taxes are often overlooked by individuals when considering their overall tax liability. Since these taxes are taken out of paychecks before workers receive them, changes in these rates can easily go unnoticed. However, couples who earn more than $250,000 jointly may get an unpleasant surprise at tax time: An increase in Medicare hospital taxes of nearly one percent may not be withheld by employers who are unaware of the joint income levels of the married couple. High-earning married couples may be responsible for any amount due that is not withheld as payroll taxes.

Reduced Deduction Percentages for Medical Expenses

Prior to the implementation of the Affordable Care Act, individuals could deduct their medical expenses if those expenses reached 7.5 percent of their adjusted gross income. That figure has now risen to 10 percent, reducing the availability of these deductions for rich and poor alike.

Changes to Flexible Spending Accounts

For 2013, only the first $2,500 deposited into flexible spending accounts (FSAs) will be tax-free. All other deposits will be liable to the regular tax rates applied to other earned income. As a result, many firms are now implementing limits of $2,500 on FSAs to eliminate the need for specialized W-2 forms and to protect their employees against potential financial liabilities when tax time rolls around once more.

New Taxes on Durable Medical Goods and Devices

The Affordable Care Act requires a new excise tax on medical devices including braces, gloves, pacemakers, nebulizers and many other items of medical equipment. While this new tax will not affect patients directly, it is likely to increase the costs of these items and may shift a greater percentage of the financial burden for advanced systems to the private individual as medical supply companies adjust their rates to make up for these added costs.

What You Can Do

Making the necessary changes to withholding, FSA contributions and other healthcare-related activities can help consumers manage the new requirements of the Affordable Care Act and can provide an added level of defense against increased taxes and reduced services in the medical arena. Make sure you consult with experienced and qualified tax experts who can advise you on the latest tax-related changes and help you navigate them.

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