Here's Some Good Tax News in 2014
You've no doubt heard about new penalties and higher taxes, and possibly the expiration of some of your favorite tax benefits. You could probably use some good news by now -- and we've found it. Check out these good news for taxpayers preparing their 2013 returns or planning for the 2014 tax year:
Simplified home office deduction rules
The IRS is making something easier? You heard that right. Not only do the new rules make it easier to take a home office deduction now, but they promise to keep things simpler when you sell your home in a later year.
You basically take a standard deduction of $5 per square foot of your home that you use for business, up to a maximum of 300 square feet. You can still take your full mortgage interest and property tax deductions on Schedule A -- no more allocating between business and personal use. And when you sell your home some years from now, you don't have to recapture depreciation on your home for the years you took the simplified option.
The simplified option is effective for your 2013 tax return, filed in 2014.
If you take the standard deduction, the amount gets a little more generous each year. For 2013, it rises to $6,100 ($12,200 for married couples filing jointly). For 2014, the standard deduction is $6,200 ($12,400 for married couples filing jointly).
The personal exemption for 2013 is $3,900, rising to $3,950 for the 2014 tax year.
If you earn money overseas, your foreign earn income exclusion is $97,600 in 2013, and $99,200 in 2014.
If you benefit from the Earned Income Credit, and you have three or more children, the maximum amount of your credit is now $6,044 for 2013 and $6,143 for the 2014 tax year.
Other tax breaks and limitations have been adjusted similarly for inflation.
The estates of taxpayers who died in 2013 have a basic exclusion of $5,250,000. For 2014, that's $5,340,000.
That's a good deal, especially compared to recent exclusion amounts. In 2008, for example, the basic exclusion amount was only $2,000,000.
Residential Energy Efficient Property Credit
Thanks to an extension through 2016, you can still get an energy efficiency tax credit for the cost of alternative energy equipment for your home.
The credit is 30% of the cost of solar hot water heaters, solar electric equipment, and wind turbines that you have installed during the year.
If you have a second home or a vacation home, take note. For this credit, the home does not have to be your main home.
Tax credits for buying health insurance
Starting in 2014, you may qualify for a tax credit to help you pay medical insurance premiums. This credit is paid directly to your health insurance company.
True, you must buy insurance through the government's Affordable Insurance Exchange to get this credit, and if you discover later that you didn't qualify for the credit, you have to pay it back. If you can't afford insurance otherwise, however, these new credits may help.
Health care FSA new $500 carryover deal
If your employer offers a Flexible Spending Arrangement, or FSA, for your benefits, you're probably aware of the use-it-or-lose-it rule for medical reimbursements. It's the reason so many people are buying new glasses in December and otherwise rushing to spend FSA money before it disappears.
Starting with the 2013 tax year, employers have the choice of giving you three months after the end of the year to use your FSA amounts for the previous year, or letting you carry forward up to $500 to the following year. Your employer must offer one option or the other -- not both.
In addition, Congress may offer more perks or extend some old ones for 2014 before the end of the year. As long as politicians want to win points with the public, we can always hope for more good news on the tax front.
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