Now that we’re starting a new year, it’s time to pay attention to the tax updates that are coming in 2014. Your tax planning should take into account two main things.
First, be aware of changes for your 2013 taxes so you file appropriately by April 15, 2014; second, realize that changes taking place in 2014 will affect the way you plan your finances for the coming year.
As you sort through your taxes for the 2013 filing season, and as you plan for the 2014 tax year, the tax preparation company Jackson-Hewitt suggests you keep these four things in mind:
1. Additional 2013 taxes for high earners
Hopefully you’ve already planned for this, but in case you haven’t, now is the time to address the issue. Tax year 2013 marked the implementation of two new taxes for high earners: a 0.9% Medicare tax and a 3.8% tax on unearned (investment) income. Ask your tax professional about these taxes. If you’re subject to them, you need to prepare to pay them by April 15, 2014.
And, of course, you can take steps to mitigate the problem going forward. Good planning can go a long way.
2. Joint returns for same-sex couples
Thanks to the recent Supreme Court ruling on DOMA, married same-sex couples can now file joint federal returns. Not only that, but it’s possible to amend past returns (up to three years back) to reflect the filing status.
It’s important to understand that this is just for federal returns. The IRS has decided that it’ll accept joint returns from couples legally married in any state, but those who reside in states not recognizing same-sex marriage might not be able to file joint state returns. This means it could get a little tricky for same-sex couples filing their taxes.
3. Tax breaks expiring at the end of 2013
If you’ve relied on certain tax breaks for the last few years, you might be disappointed to find that some of them expired at the end of 2013. These include:
- Deduction for PMI payments
- Credits for certain energy-efficient home improvements
- Deduction for university tuition and fees
- Deductions for teachers who purchased classroom supplies out of their own pockets
While Congress might act to retroactively extend some of these tax breaks, pay attention so you know what’s happening and how it applies to you.
4. Changes from the debt-ceiling battle
The next debt-ceiling battle is sure to involve some sort of tax change, and it could affect you — especially if you’re a high earner. On top of that, if there’s another government shutdown, delays could be seen during the tax-filing season. Get your tax return prepared as soon as possible so you’re not trying to figure out what to do when delays become a problem.
Though those are four things you should be aware of this tax season, be sure to speak with a knowledgeable tax professional who can help you work through your specific situation.
Will any of these changes affect you?