IRS Updates Key Tax Numbers For 2014

The IRS released its 2014 inflation adjustments yesterday. Some key takeaways:

· All tax brackets increased by ~1.7%, meaning that you’ll pay slightly less tax given the same amount of taxable income in 2014.

· The maximum allowed employee contribution to a 401k remains the same at $17,500 (+$5500 if over age 50)

· The total contribution to a 401k plan (employee + employer combined) increases from $51k to $52k.

· The maximum income allowed to be considered for defined contributions plan matches, profit sharing, etc. increased from $250k to $260k.

· The Standard Deduction amounts increased slightly to $6200 single (S), $12,400 married filing jointly (MFJ)

· The Personal Exemption increased to $3950 per family member from $3900.

· The Social Security Wage Base increased to $117,000 (this is the amount of your income that is subject to the 6.2% employer and employee social security tax).

· The Annual Gift Tax limit stayed the same at $14,000.

· The Lifetime Gift/Estate Tax Exemption increased to $5,340,000.

· The maximum allowed contribution to a Health Savings Account (HSA) increased to $3300 for single coverage, $6550 for more than one covered person.

· The Traditional IRA / Roth IRA contribution limits remained the same at $5500 (+$1000 additional if over age 50)

· The Roth IRA contribution income limits increased. The $5500 contribution begins to phase out at $114k and is eliminated completely at $129k of AGI for singles. It’s $181k and 191k for joint filers. Note, there still are no income limits on converting to a Roth IRA from a Traditional IRA.

· Itemized Deductions and Personal Exemptions begin to be limited if AGI exceeds $254,200 for singles and $305,050 for joint filers. Personal exemptions are reduced by 2% for every $2500 of AGI over that threshold. Itemized deductions are reduced by 3% of the amount that AGI is over that threshold.

· The income limits for being able to deduct up to $2500 of student loan interest start at $65k S and $130k MFJ. The deduction is completely phased out at $80k S and $160k MFJ.

· 2014 IRS Mileage Rate updates have not yet been released.

As always, you can find all tax brackets and key tax numbers listed on the Resources section of the PWA Website.

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