Year: 2014

Low and moderate-income workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return.

Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply and helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. Taxpayers have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013.

Most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Note: Elective deferrals (contributions) must have been made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.

The saver’s credit can be claimed by:

• Married couples filing jointly with incomes up to $60,000 in 2014;
• Heads of Household with incomes up to $45,000 in 2014; and
• Married individuals filing separately and singles with incomes up to $30,000 in 2014.

The saver’s credit can increase a taxpayer’s refund or reduce the tax owed. The maximum saver’s credit is $1,000 for single filers and $2,000 for married couples and is based on filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.

Other special rules that apply to the saver’s credit include the following:

• Eligible taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.

Please call us if you have any questions about the saver’s credit. We’re here to assist you.

• By Leon Clinton
• January 15, 2014
• 0 comments

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) used for business, charitable, medical or moving purposes is:

• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates. The charitable rate remains unchanged from 2013 and is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, whereas the rate for medical and moving purposes is based on the variable costs.

As always, taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates; however, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Let us know if you have any questions about standard mileage rates and which driving activities you should keep track of as tax year 2014 begins.

• By Leon Clinton
• January 10, 2014
• 0 comments

In 2014, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2014 returns, filed by most taxpayers in April 2015, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,950, up $50 from 2013.

• The new standard deduction is $12,400 for married couples filing a joint return, up $200, $6,200 for singles and married individuals filing separately, up $100, and $9,100 for heads of household, also up $150. The additional standard deduction for blind people and senior citizens is $1,200 for married individuals and $1,550 for singles and heads of household. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions such as mortgage interest, charitable contributions and state and local taxes.

• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $73,800, up from $72,500 in 2013.

We’ll be glad to help with all of your tax planning needs in 2014. Give us a call today!

• By Leon Clinton
• January 9, 2014
• 0 comments