2014 Tax Planning Difficulties
Fifty-five tax provisions expire on Dec. 31, 2013. This
doesn't affect your 2013 tax return, but tax planning for 2014 will be a
different story. Consideration of extenders has been complicated by possible
overall tax reform and budget considerations. Uncle Sam could bring in billions
by letting some or all of the extenders fade away. That would mean, however,
that individual taxpayers would lose such popular tax breaks as the itemized
deduction for state and local sales taxes, the above-the-line deductions for
tuition and fees and educators' out-of-pocket classroom expenses. The consensus
is that Congress will take up the extenders in 2014, but whether that will be
before or after the Nov. 5 midterm election is unclear. The longer lawmakers
wait, the harder it will be to plan and implement your 2014 tax strategy.
Take Advantage of Inflation Tax Adjustments
One thing we do know for sure for 2014, inflation had a
nominal effect on around 40 tax provisions. Most notable is that income
brackets were widened a little, meaning you can earn a bit more next year
without being bumped into a higher tax bracket. Most people claim the standard
deduction, and those amounts for each filing status in 2014 were increased
slightly, as was the personal exemption amount, going from $3,900 to $3,950.
However, the amounts you can contribute to your workplace pension plan and
individual retirement account in 2014 have stayed the same as in 2013.
