Every year there are new rules that could present financial planning opportunities or obstacles. Here are a few of the more common items that may impact your financial situation this year.
The Social Security Wage Base for 2014 increases from $113,700 to $117,000. Therefore, employees and their employers will pay Social Security taxes on wages up to $117,000 for a maximum Social Security Tax of $7,254 per wage earner.
Sales Tax Deduction Eliminated
Beginning in 2014, the IRS will no longer allow taxpayers to deduct sales taxes on their federal return. For the last few years, taxpayers who pay little or no state income tax have been able to take a deduction for sales tax – but that will not be an option in 2014.
Roth IRAs and Traditional IRAs
The maximum contribution limit for traditional and Roth IRAs will remain $5,500 in 2014 ($6,500 for taxpayers age 50 and above). However, the income phase-out for Roth IRAs has been increased for 2014. The new income limit is $191,000 for married filers and $129,000 for single tax filers.
401(k) Employee Contributions Remain the Same
The elective deferral to 401(k) plans will remain the same in 2014 at $17,500 per taxpayer ($23,000 for those age 50 and above).
Health Insurance Requirement
Effective in 2014, all taxpayers are required to have minimal essential health insurance coverage or face paying a penalty on their 2014 tax return. Taxpayers must enroll for coverage no later than March 31, 2014 to avoid the penalty.
Federal Estate & Gift Tax Exemption
The exclusion amount for estates of those who pass away in 2014 is $5,340,000, up from a total of $5,250,000 in 2013. The annual exclusion for gifts remain $14,000 in 2014.
NC Tax Law Changes
For those who live in NC, there is major tax reform beginning in 2014. The new tax code includes:
- Elimination of the current three bracket rates of 6, 7, and 7.75% for a flat rate of 5.8%.
- Elimination of the deduction for retirement (pension) income
- Elimination of the personal exemption per taxpayer.
- Elimination of the deduction for contributions to 529 Plans.
- Limits on the deduction of property taxes and mortgage interest to a combined $20,000.
Given the changes in 2014, it is important that you take advantage of any financial planning opportunities that are available given your specific situation. Please contact our office if you have any questions or would like to discuss financial planning opportunities that may be relevant to you.