By Kolonji Murray
With every tax season there are changes to the IRS tax code and this year is no different. Some of the changes are normal changes the IRS puts in place to adjust for inflation. Other changes are related to the full implementation of the Affordable Care Act. Whatever they are, taxpayers want to make sure they understand how it affects them. The following are 7 changes to be aware of.
1. New Penalty for Not Having Health Insurance
There have been a number of significant improvements in the quality of life for many Americans with the full implementation of the Affordable Care Act. However, one of the downsides of the Act has to do with the penalty for not signing up for health insurance. Taxpayers will have to pay an annual penalty in 2014 of $95 or 1% of their annual income, whichever is more, if they do not have the minimum essential health care coverage.
2. Tax Credits to Help Pay for Health Insurance
Also with the full implementation of the Affordable Care Act, taxpayers in many cases will receive advance premium tax credits that will help them pay the monthly premium for their health care coverage. The credits are available to taxpayers who make between 138% and 400% of the federal poverty level. Those who make 138% or less of the federal poverty level qualify for the expanded Medicaid program which would pay for most if not all of their healthcare costs.
3. Increase in Standard Deduction
For 2014, the IRS has increased the amount that all taxpayers can take as the standard deduction. For those filing single, as well as married filing separately, the deduction goes from $6,100 to $6,200. For those filing as head of household, the deduction increases from $8,950 to $9,100. For those that are married filing jointly, the deduction increases from $12,200 to $12,400.
4. Increase in the Exemption Amount
2014 also saw an increase in the personal exemption amount that individuals can have for themselves and their dependents. The amount of the exemption increases to $3,950 from $3,900.
5. Business Use of Home Deduction Change
The IRS has also introduced a simpler option for determining how much a taxpayer can deduct when it comes to business use of the home. The new simplified option allows for the taxpayer to take $5 per square foot up to 300 square feet. For those that feel they need more of a deduction, they can still use the regular method of determining that use.
6. Elimination of the Teacher’s Expense Deduction
Every year most teachers reach into their wallets and pay for miscellaneous expenses related to their classroom that ultimately benefit their students. In the past, the IRS has rewarded that practice. In 2014 that goes away. Teachers will no longer be able to write off up to $250 of those expenses.
7. Same Sex Marriage
With the2013 Supreme Court ruling, same sex couples now have the ability to file their taxes as married filing jointly; thus giving them more of a standard deduction and exemption on their tax return. Prior to the ruling, same sex couples did not have the married filing jointly option and the standard deductions available to them.
About the Author, Kolonji Murray
TaxAssurances, LLC is an independent financial services firm that provides expert advice and solutions in three financial disciplines: Accounting, Insurance and Investment Management. It’s Founder, Kolonji Murray, has worked as a banker, accountant and financial advisor for a number of leading firms. He holds a degree in Accounting from Hampton University and is active in a number of civic and industry organizations. Along with being an Accountant, Mr. Murray holds Series 7 and 66 licenses in the state of New York. He is also licensed to provide life, accident and health, variable life/variable annuities insurance.
Calling All Entrepreneurs for the NYULYP Annual Entrepreneur Marketplace
During our March General Body Meeting, we will host our annual Young Professional Entrepreneur Marketplace on Tuesday, March 18th from 6:30pm to 8:30pm at JP Morgan. This will be an opportunity to showcase your business to a diverse network of young professionals, learn tips on how to grow your business, meet potential clients, and network with other business owners. If you are an entrepreneur and meet the criteria below, please email Membership Chair, Erika Beckles, at YPMembership@nyul.org. The deadline to respond is Friday, March 7th.
1. Business must be in operation for a minimum of one year prior to the event
2. Must have a functioning website at the time of expressed interest
3. Must have official documentation showing business license, incorporation, etc.
Note: Current YP members may participate for free. The Non-Member fee to participate is $50