Standard  Deduction:

a.       Single: $6,100

b.      Married Filing Joint (MFJ) or Qualifying Widower: $12,200

c.       Head of Household (HOH): $8,950

d.      Age 65 and/or blind, per person, per event in 2014 are:

                                                              i.      MFJ, QW, or Married Filing Separate (MFS): $1,200

                                                            ii.      Single or HOF: $1,500

*Standard deduction is greater of $1,000 or earned income plus $350, up to the regular standard deduction.*

 

2.      2013 Federal Income Tax Rates & Brackets:

a.       Single Filing Status:

0

to

$8,925

x

10%

minus

$0.00

= Tax

$8,926

to

$36,250

x

15%

minus

$446.25

= Tax

$36,251

to

$87,850

x

25%

minus

$4,071.25

= Tax

$87,851

to

$183,250

x

28%

minus

$6,706.25

= Tax

$183,251

to

$398,350

x

33%

minus

$15,869.25

= Tax

$398,351

to

$400,000

x

35%

minus

$23,836.25

= Tax

$400,001

and over

x

39.6%

minus

$42,236.25

= Tax

 

b.      MFJ or QW Filing Status:

$0

to

$17,850

x

10%

minus

$0.00

= Tax

$17,851

to

$72,500

x

15%

minus

$892.50

= Tax

$72,501

to

$146,400

x

25%

minus

$8,142.50

= Tax

$146,401

to

$223,050

x

28%

minus

$12,534.50

= Tax

$223,051

to

$398,350

x

33%

minus

$23,687.00

= Tax

$398,351

to

$450,000

x

35%

minus

$31,654.00

= Tax

$450,001

and over

x

39.6%

minus

$52,354.00

= Tax

 

c.       MFS Filing Status:

0

to

$8,925

x

10%

minus

$0.00

= Tax

$8,926

to

$36,250

x

15%

minus

$446.25

= Tax

$36,251

to

$73,200

x

25%

minus

$4,071.25

= Tax

$73,201

to

$111,525

x

28%

minus

$6,267.25

= Tax

$111,526

to

$199,175

x

33%

minus

$11,843.50

= Tax

$199,176

to

$225,000

x

35%

minus

$15,827.00

= Tax

$225,001

and over

x

39.6%

minus

$26,177.00

= Tax

 

d.      HOH Filing Status:

$0

to

$12,750

x

10%

minus

$0.00

= Tax

$12,751

to

$48,600

x

15%

minus

$637.50

= Tax

$48,601

to

$125,450

x

25%

minus

$5,497.50

= Tax

$125,451

to

$203,150

x

28%

minus

$9,261.00

= Tax

$203,151

to

$398,350

x

33%

minus

$19,418.50

= Tax

$398,351

to

$425,000

x

35%

minus

$27,385.50

= Tax

$425,001

and over

x

39.6%

minus

$46,935.50

= Tax

 

 

 

3.      Personal Exemption and Dependent: $3,900

 

4.      2013 Standard Mileage Rates:

Business

$0.565

Depreciation

$.023

Charitable

$0.14

Medical & Moving

$0.24

 

 

5.      Social Security Highlights:

Employee’s portion of FICA

2014

2013

2012

Maximum earnings subject to Social Security tax (Medicare no limit)

$117,000

$113,700

$110,100

Social Security tax rate

6.20%

6.20%

4.20%

Medicare tax rate

*1.45%

*1.45%

1.45%

Maximum Social Security tax

$7,254.00

$7,049.40

$4,624.20

*ADDITIONAL MEDICARE TAX ON EARNED INCOME: Individuals will be taxed an additional .9% on wages, compensation, & self-employment income over the threshold amounts, PLUS 3.8% on unearned income above the threshold amount.

 

Threshold amounts are

MFJ: $250,000

MFS: $125,000

Single, HOH, QW: $200,000

 

The extra .9% applies to the combined income of taxpayer and spouse on a MFJ return. In the wages or taxpayer or spouse alone are over the threshold amount, the employer will withhold the extra .9%.

 

Traditional Medicare tax of 1.45% plus the extra .9% will all be reported in box 6 of the W2. Any overwithholding of this tax is refunded to the taxpayer on the 1040. Any underwithholding of medicare tax is also used on the 1040 to calculate the balance of the medicare tax due on the 1040.

 

6.      Individual Contribution Limits (ROTH or Traditional):

a.       Under Age 50: $5,500

b.      Age 50 or over: $6,500

c.       If taxpayer is an active participant in an employer-sponsored pension plan, the deduction for a traditional IRA contribution is phased out when MAGI is between the following:

 

Tax Year

MFJ

Single, HOH

MFS

2014

$96,000 to $116,000

$60,000 to $70,000

$0 to $10,000

2013

$95,000 to $115,000

$59,000 to $69,000

$0 to $10,000

2012

$92,000 to $112,000

$58,000 to $68,000

$0 to $10,000

2011

$90,000 to $110,000

$56,000 to $66,000

$0 to $10,000

 

d.      If individual is NOT an active participant, but the spouse is, the non-active participant’s deduction is phased out when modified AGI is between the following:

 

Tax Year

MFJ

MFS

2014

$181,000 to $191,000

$0 to $10,000

2013

$178,000 to $188,000

$0 to $10,000

2012

$173,000 to $183,000

$0 to $10,000

2011

$169,000 to $179,000

$0 to $10,000

e.       Nondeductible contributions are added to the taxpayer’s basis in the IRA and are tax free when withdrawn after retirement (use form 8606 to keep track of this). If filing married filing separate (MFS), and both spouses did NOT live together at any time during the year, they are considered as Single for purposes of the phase-out rules.

 

 

 

 

 

7.      $2,500 limit to the maximum amount that can be reimbursed for incurred medical expenses for an Health FSA that is under a SECTION 125 CAFETERIA PLAN.  This limit does not apply to Health Reimbursement Accounts (HRA) or Flexible Spending Arrangements (FSA) that are not part of Café 125 plans.  Simple Cafeteria Plans with nongroup health insurance policies have no employer contribution limits to FSAs (Section 125(j)) as employee-paid personal health insurance policies are treated as employer contributions, thus allowing for unlimited FSAs in that arrangement.

 

 

8.      New $500 Carryover for traditional Section 125 Plans with Health FSA: Originally, any unused amounts in the FSA at the end of the year were either forfeited or were given a grace period to be used in the first 2 1/2 months of the new year to be utilized. However, the new rule allows a participant (employee) to either use the $500 carryover  to the new year, or the balance of the monies in the account until the 2 ½ months into the new year.  The plan must be amended to decide which provision to use.

 

9.      Long Term Capital Gains (LTCG) and Qualified Dividends (QD) Rates for 2013 & After:  

Ordinary Bracket Rate of Taxpayer on 1040 Form

LTCG & QD Rates (Same)

39.6% after 2012

20%

25% to rate below the top rate

15%

10% or 15%

0%

 

 

 

 

 

 

 

 

10.  Improvements to Buildings: Taxpayers can now elect to expense repairs vs capitalizing.  Any expenses, repairs, maintenance made to a building during the tax year equal to or lesser than $10,000 or 2% of the unadjusted basis of the building. This must be done on a building by building basis, and by attaching an Election to the tax return each year the election is made and the costs are incurred.  Only taxpayers whose gross receipts are $10 million or less over a 3 year average qualify for the Election for an eligible building.  An eligible building is a building owned or leased by the taxpayer with an unadjusted basis of $1 million or less. This election eliminates the need to separately analyze the building structure and the building systems to determine whether an expense is a repair or maintenance, which normally can be expensed, or an improvement which normally must be capitalized and subject to depreciation.  The election is made annually on a building-by-building basis by including a statement on the taxpayer’s timely filed (including extensions) original tax return for the year the costs are incurred.  The election must be attached to the return and is made pursuant to Regulation section 1.263(a)-(3)(h).

 

11.  $200 expense election: Taxpayers can also now deduct the cost of an item regardless of its useful life if the item costs no more than $200. Regulation 1.162-3(c)(1)(iv).

 

12.  $500 invoice election: An election is available to treat the cost of qualifying depreciable tangible property as a currently deductible expense rather than capitalizing the cost and taking depreciation deductions.  The dollar limit is $500 per invoice if the taxpayer does not have audited financial statements and $5,000 per invoice if the taxpayer does have audited financial statements. The election is made by attaching a statement to a timely filed (including extensions) original tax return for the year in which the amounts were paid.  The statement must be titled “Section 1.263(a)-1(f) de minimis safe harbor election.”

 

 

13.  Maximum Section 179 Depreciation Deduction & Investment Limits:

Year

Maximum Deduction

Investment Limit

2013

$500,000*

$2,000,000

2012

$500,000

$2,000,000

2011

$500,000

$2,000,000

2010

$500,000

$2,000,000

 

 

 

 

 

 

 

 

*Limited to $25,000 for SUVs weighing more than 6,000 lbs curb weight, placed in service after October 22, 2004, $11,160 for passenger vehicles for regular vehicles, & $11,360 for SUVS under 6,000 lbs in curb weight, placed in service on or after 2012.

 

14.  ITINS Set to Expire:  Individual Tax Identification Numbers issued after January 1st, 2013 are now valid for only five years.  Those who are still in need of ITINS will need to reapply.

 

15.  Medical Expense Deduction: Prior to 2013, only expenses that were in excess of 7.5% of Adjusted Gross Income (AGI) were deducted on the taxpayer's Itemized Deduction. Unless the taxpayer or spouse turns 65 before the end of the year, the threshold has been raised to 10% of AGI. E.g., a taxpayer who has $65,000 in adjusted gross income, and $7,000 in qualified medical expenses, may be able to deduct only $500 in medical expenses on their Schedule A of their personal tax return ($7,000 - $6,500 10% of AGI). The deductible amount, in addition to other itemizable expenses, must still be in excess of the standard deduction per the filing status of the taxpayer, in order for it to have any impact on lowering taxable liability.

 

16.  3.8%  Additional tax on Net Investment Income. 

 

Individual taxpayers will be subject to an additional 3.8% on the lesser of:

 

a.       Their Net Investment Income. or their

b.      Modified Adjusted Gross Income Income (Total Income in most cases) minus the threshold amount.  Threshold amounts are $250K MFJ; $125K MFS; and $200K Single, HOH, QW.

 

Example: Single taxpayer has MAGI of $285,000, of which $25,000 is Net Investment Income.

 

MAGI:                                           $282,000

            Thresshold for a single person:    -$200,000

MAGI minus Threshold                  $82,000

Since $25,000 is lesser than the calculated difference of MAGI and the threshold, the 3.8% is multiplied by lesser amount, $25,000.

 

Lesser of MAGI less

Threshold or NII                              $25000

Medicare Investment Tax 3.8%       $950

 

***There is no additional tax if the MAGI is not over the threshold amounts regardless of net investment income amount. Likewise, there is no additional tax if there is No Net Investment Income regardless of income level.***

 

17.  Simplified Home Office Deduction: Instead of calculating the home office use by percentage of use over total area of the home, taxpayer can take $5 per square foot regardless of actual costs, limited to 300 square feet. Allowable itemized deductions, such as mortgage interest and real estate taxes are claimed in full on Schedule A without the need to reduce these deductions for the amount claimed on Schedule C or Form 2106. There is no home depreciation deduction or later recapture of depreciation when this simplified option is used.  Taxpayers must STILL follow the  home office qualifying rules (exclusive use test, regular use test, trade or business use test, principal place of business test, etc.). 

 

18.  Short Term and Long Term Capital gains and losses reported on form 1099B where the cost basis was reported to the IRS and for which the taxpayer has no adjustments may now report the short term and long term gain or loss as one line item on Schedule D instead of reported each trade separately on form 8949.  Taxpayer MUST attach the brokerage statement listing all the transactions however, to the tax return.

    

 

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2017 Annual Adjustment Amounts: Tax Rates, Deductions, & Exemptions;


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2016 Annual Adjustment Amounts: Tax Rates, Deductions, & Exemptions;

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2015 Annual Adjustment Amounts: Tax Rates, Deductions, & Exemptions;

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2014 Annual Adjustment Amounts: Tax Rates, Deductions, & Exemptions;

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Questions & Answers on NII & Additional Medicare Tax

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Are you living abroad and a dual citizen?? Click here.

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"OVDI" (Offshore Voluntary Disclosure Program) Remains Open For Those With Undisclosed Foreign Income/Assets;

Other Options other than OVDP remain open too, like Streamlined Procedures.

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DNA India, a leading Mumbai daily, quotes Vimlan Tax Services. Click here...

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Mileage Rates for 2016 are here..

  1. 54 cents per mile for business miles driven (down from 57.5 cents in 2015);
  2. 19 cents per mile driven for medical or moving purposes;
  3. 14 cents per mile driven in service of charitable organizations;


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Mileage Rates for 2015 are here..

  1. 57.5 cents per mile for business miles driven (up from 56 cents in 2014);
  2. 23 cents per mile driven for medical or moving purposes;
  3. 14 cents per mile driven in service of charitable organizations;


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International Income Tax Liability...


Worldwide Income Reporting and Foreign Accounts

Most people filing US tax returns know if they are a US Citizen or a Greencard holder, but most do not know if they are a US "tax" resident. You may read the April 2011 E-newsletter we put out which explains the classifications mentioned above or call our office to request an appointment with a qualified tax advisor to discuss your case. Our December 2015 E-newsletter is out as well.