4 Tax Changes You Should Know About in 2014

by Miranda Marquit · 9 comments

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?

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{ 9 comments… read them below or add one }

John S @ Frugal Rules January 7, 2014 at 6:41 am

I think we may come out unscathed for this year, but came very close to bumping up against #1 for 2013. I believe we may be impacted by some of the business tax changes, so we’ll see how that plays out for us.

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Janine @ MoneySmartGuides January 7, 2014 at 5:53 pm

Great things to keep an eye on! It’s amazing how things can change so drastically from year to year.

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Tim January 7, 2014 at 9:55 pm

Not being able to deduct tuition payment really sucks :(.

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KM January 9, 2014 at 10:48 am

Indeed. My husband is starting college this year, so living on one income and not being able to deduct the expenses will make it more difficult. I remember how nice it was to get all those credits when I went to college.

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David Ning January 9, 2014 at 2:29 pm

Have you thought about putting some cash in 529 plans? The savings may not be much since your husband is already in school, but not needing to pay tax on the interest earned for a couple years on short term investments is still a good idea.

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Grinch January 9, 2014 at 8:28 pm

Tim and KM,
Recommend you go to irs.gov and read pub 970. That will tell you whether your education expenses are deductible. There are several different options. You can also order the pub and the IRS will mail it to you for free.
Grinch

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property marbella January 8, 2014 at 2:22 am

You must always use an accountant to review and help you with your tax return, it always pays off.

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David Ning January 9, 2014 at 2:33 pm

An accountant is a good idea, but don’t fall into the trap of just handing everything to him/her and expect to find every tax break.

I use a CPA and I spend just as much time as if I were to file my tax return. Instead of spending the time doing the grunt work, I double check his work and also to make sure we are taking advantage of all the tax breaks I’m legally entitled to.

This approach not only saves me money overall, but I can also become familiar with tax laws so I can make logical decisions throughout the year to save even more taxes.

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Mary D. Cribb January 29, 2014 at 10:48 am

Where is your closes office for taxes near Franklin Va.

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