Tax season is here and with it comes the confusion and general nightmare that all taxpayers know and loathe. The information below covers new and updated taxes that affect individuals' 2014 returns and in turn, their IRS tax refund.
2014 Tax Breaks
The good news is that 2013’s tax breaks were renewed for 2014. The bad news is that they were only renewed for this year, meaning that Congress will be revisiting the topic in 2015. Key tax breaks remain in place and include the following:
- School teachers are allowed to deduct $250 for the cost of classroom supplies bought with their personal funds.
- Those who itemize their taxes and live in states without an income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) are allowed to deduct state and local sales taxes on their federal returns
- Forgiven debt on a mortgage for a primary residence is not taxed (up to $2 million)
- Those who bought a house with less than 20% down since 2007 are allowed to write off both the interest and the private mortgage insurance.
- A $4,000 deduction is allowed for costs incurred by the pursuance of post-secondary education.
- Up to $500 can be credited to those who made their homes more energy efficient.
- Commuters, both those who use mass transit and those who drive, are allowed to set aside $250 of pretax dollars per month through employer-administrated programs in order to pay for commuting expenses. However, this measure is only retroactive to 2014 and the restoration of the higher rate that expired in January will not be extended into 2015.
- Individuals over the age of 70 ½ are not required to pay tax on charitable gifts distributed from their retirement account. However, this only applies to sums that are equal to or under $100,000.
- People who were disabled before they reached 26 years of age may deposit up to $14,000 annually in an ABLE account; as long as this money is used for transportation, wellness, education, and/or housing, the earnings from the account will be allowed to grow tax-free. This money does not disqualify the individual from receiving federal assistance benefits.
- Refunds for sales of stocks in demutualized insurance firms are still on hold, as the IRS continues to maintain that the received stock has no basis. That particular issue is before an appeals court now, but no decision will likely be reached until late in 2015.
Additional Noteworthy Items
- Executors of estates should pay the IRS before distributing bequeaths. The estate must be able to pay in entirety the money it owes the IRS; failing to do so makes the executor personally liable.
- The IRS’s total funding has been cut by $345.6 million for the upcoming year, though taxpayer service will receive $34 million more than it received in 2014. This increase is unlikely to have a noticeable effect due to the large numbers of people that will call with questions about new regulations. Lastly, funding for enforcement has been cut by $254 million; this means that the audit rate, which was under 1% in 2014, will fall even more. While this may put some at ease, the extremely low exam rate means that more fraudulent claims are slipping through the cracks; phony claims cost the government $14 billion last year.
We know this is all a bit overwhelming, but there's no need to worry. This year, you can leave everything up to the experts at Lank, Johnson & Tull, CPAs! We can help you maximize your IRS tax refund; just click the graphic below to learn how.