2014 Tax Brackets

The Internal Revenue Service has announced the annual inflation adjustments for a number of provisions for the year 2014, including tax rate schedules, tax tables and cost-of-living adjustments for certain tax items. 2016 Tax Brackets/2016 Tax Rates are available here.

These are the applicable numbers for the tax year 2014. That means the year that we are in now. They are NOT the numbers and rates that you’ll use to prepare your 2013 tax returns in 2014 (the season is starting late this year).  These numbers and rates are those you’ll use to prepare your 2014 tax returns in 2015. Got it? Good. Onto the highlights:

Tax Brackets. The big news is, of course, the new tax brackets. Here’s what’s on tap for 2014:

Single Taxpayers:

tax chart

Married Filing Jointly and Surviving Spouses:

Head Of Household:

Married Filing Separately:

(See how they compare to the 2013 brackets here.)

Standard Deductions. The standard deduction rises to $6,200 for single taxpayers and married taxpayers filing separately. The standard deduction is $12,400 for married couples filing jointly and $9,100 for heads of household. Here’s how those rates compare to 2013:

Itemized Deductions. The limitation for itemized deductions – the Pease limitations, named after former Rep. Don Pease (D-OH) – claimed on individual returns for tax year 2014 will begin with incomes of $254,200 or more ($305,050 for married couples filing jointly). The Pease limitations were slated to be reduced beginning in 2006 and eliminated in 2010; as with the other tax cuts, the elimination was extended through the end of 2012. The limitations were brought back in 2013 at the original thresholds, indexed for inflation. The result of those changes is basically an increase in the top marginal tax rates.

Personal Exemptions. The personal exemption amount is $3,950 in 2014, up from $3,900 in 2013. Phase-outs for personal exemption amounts (sometimes called “PEP”) begin with adjusted gross incomes (AGI) of $254,200 for individuals and $305,050 for married couples filing jointly; the personal exemptions phase out completely at $376,700 for individual taxpayers ($427,550 for married couples filing jointly.)

Alternative Minimum Tax (AMT) Exemptions. The AMT exemption amount for tax year 2014 is $52,800 for individuals and $82,100 for married couples filing jointly. That compares to $51,900 and $80,800, respectively for 2013. In years past, the AMT was subject to a last minute scramble by Congress to “patch” the exemption but as part of the American Taxpayer Relief Act of 2012 (ATRA), the AMT is permanently adjusted for inflation – that’s why you see it in this list.

Earned Income Tax Credit (EITC). For 2014, the maximum EITC amount available is $3,304 for taxpayers filing jointly with one child; $5,460 for two children; $6,143 for three or more children and $496 for no children.

Child Tax Credit. For taxable years beginning in 2014, the value used to determine the amount of credit that may be refundable is $3,000 (the credit amount has not changed).

Kiddie Tax. For 2014, the threshold for the kiddie tax – meaning the amount a child can take home without paying any federal income tax – remains at $1,000.

Adoption Credit. For taxable years beginning in 2014, the credit allowed for an adoption of a child with special needs is $13,190; the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,190. Phase outs do apply beginning with MAGI in excess of $197,880.

Hope Scholarship Credit. In 2014, the Hope Scholarship Credit cannot exceed $2,500. The amount you can claim is equal to 100% of qualified tuition and related expenses not in excess of $2,000 plus 25% of those expenses in excess of $2,000 but not to exceed $4,000.

Flexible Spending Accounts. The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending accounts (FSA) remains at $2,500 for 2014.

Individual Retirement Account Contributions. The $5,500 limit on IRA contributions remains the same in 2014.

Federal Estate Tax Exemption. The exclusion amount for estates of decedents who die in 2014 is $5,340,000, up from a total of $5,250,000 in 2013.

Federal Gift Tax Exclusion. The annual exclusion for gifts remains at $14,000 for 2014.

All together, the IRS posted more than 40 updates. You can read more about them at Revenue Procedure 2013-35 (downloads as a pdf).