Key Numbers for 2017 Taxes

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Standard Deduction Amount

Single: $6,350

Married Filing Joint: $12,700

Married Filing Separately: $6,350

Head of Household: $9,350

Personal & Dependency Exemption: $4,050

Phase-Out Threshold for Exemptions and Itemized Deductions

Single: $261,500

Married Filed Jointly: $313,800

Married Filing Separately: $156,900

Head of Household: $287,650

Long-Term Capital Gains Rates

Taxpayers in top tax bracket (39.6%):  20%

Taxpayers in 25%, 28%, 33%, and 35% tax brackets:  15%

Taxpayers in tax rate bracket 15% or less:  0%



Updated Standard Mileage Rates

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Standard Mileage Rates:  2017

Business         53.5 cents

Medical          17 cents

Charity           14 cents

Moving           17 cents

Key Numbers for 2015 Taxes

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Alternative minimum tax (AMT) 2014 2015
Maximum AMT exemption amount $82,100 (MFJ) $52,800 (Single/HOH) $41,050 (MFS) $83,400 (MFJ) $53,600 (Single/HOH) $41,700 (MFS)
Exemption phaseout threshold $156,500 (MFJ) $117,300 (Single/HOH) $78,250 (MFS) $158,900 (MFJ) $119,200 (Single/HOH) $79,450 (MFS)
26% rate applies to AMT income (AMTI) at or below this amount (28% rate applies to AMTI above this amount) $182,500 ($91,250 if MFS) $185,400 ($92,700 if MFS)

 

Exemptions/itemized deductions 2014 2015
Personal & dependency exemptions $3,950 $4,000
Phaseout threshold for exemptions and itemized deductions $305,050 (MFJ) $279,650 (HOH) $254,200 (Single) $152,525 (MFS) $309,900 (MFJ) $284,050 (HOH) $258,250 (Single) $154,950 (MFS)

 

Standard deduction 2014 2015
Standard deduction amount $12,400 (MFJ) $9,100 (HOH) $6,200 (Single) $6,200 (MFS) $12,600 (MFJ) $9,250 (HOH) $6,300 (Single) $6,300 (MFS)
Standard deduction for dependent Greater of $1,000 or $350 + earned income Greater of $1,050 or $350 + earned income
Additional deduction for aged/blind $1,550 (single or head of household) $1,200 (all other filing statuses) $1,550 (single or head of household) $1,250 (all other filing statuses)

QCDs for 2014. Absent new legislation, however, QCDs cannot be made for 2015.

Top tax brackets 2014 2015
Single 39.6% of taxable income exceeding $406,750 + $118,118.75 39.6% of taxable income exceeding $413,200 + $119,996.25
MFJ 39.6% of taxable income exceeding $457,600 + $127,962.50 39.6% of taxable income exceeding $464,850 + $129,996.50
MFS 39.6% of taxable income exceeding $228,800 + $63,981.25 39.6% of taxable income exceeding $232,425 + $64,998.25
HOH 39.6% of taxable income exceeding $432,200 + $123,424 39.6% of taxable income exceeding $439,000 + $125,362

 

 

Long-term capital gains andqualifying dividends1 generallytaxed at maximum rate of: 2014 2015
Taxpayers in top (39.6%) tax bracket 20% 20%
Taxpayers in 25%, 28%, 33%, and 35% tax rate brackets 15% 15%
Taxpayers in tax rate bracket 15% or less 0% 0%

1 Generally, qualifying dividends are dividends received by an individual shareholder from domestic and qualified foreign corporations

Unearned income Medicare contribution tax (Net investmentincome tax) 2014 2015
Amount of tax 3.80% 3.80%
Applies to lesser of (a) net investment income or (b) modified adjusted gross income exceeding:
Individuals $200,000 $200,000
Married filing jointly $250,000 $250,000
Married filing separately $125,000 $125,000

 

Standard mileage rates 2014 2015
Use of auto for business purposes (cents per mile) $0.56 $0.575
Use of auto for medical purposes (cents per mile) $0.235 $0.23
Use of auto for moving purposes (cents per mile) $0.235 $0.23
Use of auto for charitable purposes (cents per mile) $0.14 $0.14
Qualified charitable distributions (QCDs) Qualified charitable distributions (QCDs) are distributions made directly from an IRA to a qualified charity. Such distributions may be excluded from income and count toward satisfying any required minimum distributions (RMDs) you would otherwise have to receive from your IRA. Individuals age 70½ and older could make up to $100,000 in 

Provisions that are extended through 2014and then expire

  • Increased Internal Revenue Code (IRC) Section 179 expense limits ($500,000 maximum amount decreases to $25,000 in 2015) and “bonus” depreciation provisions
  • The $250 above-the-line tax deduction for educator classroom expenses
  • The ability to deduct mortgage insurance premiums as qualified residence interest
  • The ability to deduct state and local sales tax in lieu of the itemized deduction for state and local income tax
  • The deduction for qualified higher education expenses

 

Key Numbers for 2014 Taxes

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Standard Deductions

Married Filing Joint- $12,400

Married Filing Seperately- $6,200

Head of Household- $9,100

Single – $6,200

 

Personal Exemptions are now $3,950 (up from $3,900 in 2013)

 

Qualified Plans:

Maximum elective deferral

401k, 403b, etc – $17,500

SIMPLE IRA – $12,000

Keogh and SEP IRAs – $52,000

Catch up contributions (individuals who will be at least age 50 by the end of the year)

401k, 403b, and 457 plans- $5,500

SIMPLE IRA – $2,500

ROTH IRA and Traditional IRA Contribution Limits:

Regular- $5,500

Catch Up- $1,000

 

Mileage Rates:

Business = 56 cents per mile

Medical = 23.5 cents per mile

Charitable = 14 cents per mile

Moving = 24 cents per mile

Looking Forward to 2014 Tax Laws

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The last few years have featured so many tax changes that it is hard to keep them straight. For some help, here’s a quick summary of some of the most important federal tax changes that will affect individual taxpayers in 2014.

Penalty for failure to comply with individual health insurance mandate:

Starting this year, the Obamacare law says individuals who fail to carry “adequate” health insurance will face a penalty. More specifically, nonexempt U.S. citizens and legal residents will owe the penalty if they don’t have so-called minimum essential coverage. There are a number of exceptions to the penalty, such as the one for eligible lower-income individuals and the one for certain folks whose existing health insurance plans were canceled. More details to follow.

New tax credit for buying health insurance:

For 2014, a so-called premium assistance credit is available to eligible taxpayers who obtain qualifying health insurance by enrolling through a state exchange or an exchange operated in partnership between a state and the federal government. This is the health insurance subsidy that you’ve probably heard or read a lot about. You are potentially eligible if your household income is between 100% and 400% of the federal poverty line and you don’t have access to employer-sponsored affordable coverage. The allowable credit can vary widely depending on your specific circumstances.

The credit can be paid by the government directly to your insurance company to lower your monthly premiums or it can be claimed when you file your federal income tax return. You may not know the exact amount of your allowable credit until you file your return. Any differences between what you receive in the form of reduced insurance premiums and the credit you’re actually entitled to for the year will be reconciled when you file your 2014 return sometime next year. In other words, if you collect more than you’re entitled to, you’ll have to pay back the excess with your return.

On the plus side, the credit is refundable. That means you can collect the full credit even if it exceeds your federal income tax liability for this year. More specifically, the credit is first used to reduce your 2014 federal income tax bill. After your tax bill has been reduced to zero, any remaining credit can be either refunded to you in cash or used to make estimated tax payments for 2015.

New $500 carry-over deal for health care FSAs:

Late last year, the IRS announced a new exception to the dreaded “use-or-lose” rule for health care flexible spending accounts (FSAs). Under the exception, employers can allow you to carry over to the following year up to $500 of any unused balance from the previous year. The new carry-over deal is in lieu of allowing a grace period through March 15 of the following year to incur enough expenses to use up your unused balance from the previous year. In other words, your company’s health care FSA plan can allow either the $500 carry-over deal or the grace period deal but not both. Contact your employee benefits department to see what your company plan allows, because it may affect what you need to do between now and March 15 if you have an unused balance left over from last year.

Key individual tax breaks that expired at the end of last year:

Some or all of these may be retroactively reinstated, but that may not happen until after the November elections.

  • Option to deduct state and local sales taxes: Last year, you had the choice of claiming an itemized deduction for state and local sales taxes instead of an itemized deduction for state and local income taxes. This option was beneficial if you lived in a state with no personal income taxes or if you paid only a minimal state income tax bill.
  • Deduction for higher education tuition and related fees: This write-off was up to $4,000, or up to $2,000 for higher-income folks.
  • Tax-free treatment for forgiven mortgage debt: Canceled debts generally count as taxable cancellation of debt (COD) income. A temporary exception applied to COD income from canceled mortgage debt that was used to acquire a principal residence: up to $2 million that was canceled in 2007-2013 was treated as a federal-income-tax-free item.
  • Charitable donations from IRAs: Last year, IRA owners who had reached age 70½ by Dec. 12, 2013 were allowed to make charitable donations of up to $100,000 directly out of their IRAs. The donations counted as IRA required minimum distributions. So well-off seniors could reduce their taxes by arranging for charitable donations from their IRAs to replace taxable IRA required minimum distributions. Unless Congress takes action, this tax-smart deal won’t be available this year.
  • Larger tax break for transit passes: Your employer may allow you to reduce your taxable salary to pay for transit passes to get to and from work. In 2013, the maximum monthly amount you could set aside was $245. Unless Congress takes action, the monthly maximum for this year will be only $130.
  • $500 credit for energy-efficient home improvements: Under this break, you could claim a tax credit of up to $500 for certain energy-saving improvements to your principal residence.
  • $250 deduction for teacher school expenses: Teachers and other personnel at K-12 schools could deduct up to $250 of school-related expenses paid out of their own pockets.

New Tax Laws for 2013

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Here are a few of the provisions in the Fiscal Cliff Bill and the tax laws for 2013.

• Filers making below $110,000 can still deduct mortgage insurance premiums through 2013–plus this was made retroactive to cover 2012.

• Mortgage cancellation relief–which is for home owners or sellers who have some amount of their mortgage debt (on their primary residence) forgiven by their lender in a situation such as a short sale, foreclosure or modification–was extended for one year to January 1, 2014.

• The 10% tax credit (limited to $500) for homeowners for energy improvements (energy efficiency tax credit) to existing homes is extended through 2013 and made retroactive to cover 2012.

• The rate for Capital Gains will remain at 15% for individuals at the top income amount of $400,000 and $450,000 for a joint return. Gains over and above these amounts will be subject to a 20% tax. Remaining in place is the $250/500K exclusion for the sale of a principal residence.

• Individual estates will have the first $5 million dollars exempted and family estates will have $10 million exempted.

• Qualified leasehold improvements on commercial properties have been extended through 2013 and retroactive to cover 2012 and are subject to a 15 year straight-line cost recovery.

To understand how all of this impacts your individual situation, feel free to contact us anytime at 651-647-4935.

What the Fiscal Cliff Deal Really Means

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The agreement means an increased tax bill for married couples earning more than $450,000—$400,000 for single filers—as the current top rate of 35 percent rises to 39.6 percent. Americans earning at this level will also experience a change in the taxes they pay on dividends and capital gains, with these rates increasing from 15 percent to 20 percent—an amount far less than the 40 percent originally sought by the Administration.
The tax measures have angered both liberals —who strongly believe the President should have held his ground on the promise to apply the increases to those earning in excess of $250,000—and conservatives who object to any tax increase whatsoever with equal fervor.
However, not all taxpayers earning less than $450,000 come away unscathed by the deal as the agreement returns to the Clinton era limits on personal exemptions and itemized deductions for couples earning more than $$300,000 and single filers earning in excess of $250,000,
As for estate taxes, the rates will rise from 35 percent to 40 percent for estates valued at over $5 million dollars, however the Republicans did succeed in building in a provision which allows the amount of the exemption (currently five million dollars) to be indexed to the rate of inflation.
But it isn’t all just about taxes as the Senate bill addresses a number of additional and parallel issues that fed into the fiscal cliff fiasco—including passage of a nine month extension of the farm bill, temporarily removing the threat of a radical rise in the price of milk.
Here’s a summary—
• Unemployment benefits are extended for an additional year benefiting approximately 2 million out of work Americans.
• Tax credits for college tuition, created by the 2009 stimulus package, are extended for five year, benefiting some 25 million low income families.
• The “doctor fix” is included meaning that Medicare providers will not face a serious cut in pay.
• The Alternative Minimum Tax problem is permanently fixed removing a potential tax danger for middle class families.
• A number of existing business tax benefits will remain in place for another year, including renewable energy tax credit which is extended for an additional year.
• The $900 per year salary raise recently signed into existence by President Obama for members of Congress is revoked.
Not included in the agreement is an extension of the payroll cut meaning that payroll taxes will rise by for 2 percent for all American wage earners.
Also not included is a rise in the debt ceiling. The nation actually reached its debt ceiling yesterday and, while the Treasury Department says that it can continue to pay outstanding debt obligations and other bills for another two months, there will need to be an all new debt ceiling battle in Congress beginning in February to allow the nation to continuing making payments on its debt obligations.
Which brings us to the sequester—the harsh cuts to the federal budget scheduled to go into effect today. Per the agreement, the cuts have been delayed for two months, with the obvious intent of taking up these cuts as a part of our next fiscal fiasco —the debt ceiling debates coming in February to a Congress near you.
If you’re into picking the winners and the losers, you’ll find that your choices will be guided by those elements of the deal that strike closest to home.
Conservatives, already unhappy with tax increases, are likely to be further displeased that the Senate agreement fails to actually deal with spending—something Minority Leader Mitch McConnell acknowledged yesterday when asking GOP Senators to vote for the bill despite its failure to address spending cuts, noting that the tax portion of the fiscal cliff was the most important component of the deal.
Of course, McConnell knows full well that February is just days away and that he will get another large bite at the spending apple when the battle moves on to the debt ceiling where Congressional Republicans expect to hold better cards than they possessed in the current debate.
Liberals, as noted, are unhappy with lowering the threshold for the income tax increase and are additionally rankled by the estate tax provisions that maintain the $5 million exemption with the potential for the exemption to rise to more than $15 million by 2020. Rep. Chris Van Hollen., ranking Democrat on the House Budget Committee, called the deal a “sweetheart give away to the wealthiest 7,200 estates in the country.”
Centrists will likely view the anger on both sides as an indication that a fair and reasonable compromise has been accomplished.

Key Numbers for 2013

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401k, 403b, 457 Plan Maximum Contributions: $17,500 ($17,000 in 2012)
Catch up Contributions (for age 50 and older) $5,500 ($5,500 in 2012)

ROTH IRA Maximum Contributions: $5,500 ($5,000 in 2012)

ROTH Income Thresholds: Married- $178,000-$188,000
Single- $110,000-$125,000

SIMPLE IRA Maximum Contributions: $12,000 ($11,500 in 2012)

Maximum Taxable Wage Base for Social Security Taxes: $113,700 ($110,100 in 2012)

Summary of Tax Relief Act of 2010 and how it affects you.

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On December 17, 2010 the President signed into law the Tax Relief Unemployment InsuranceReauthorization and Job Creation Act of 2010.  The massive tax relief package, enacted after months of debate, provides tax benefits for 2010, 2011, and 2012.  Below is a summary of key items within that Act and how it will affect you

 Payroll tax cut in 2011.  For 2011 only, employees will get an increase in their take home pay of 2%, as only 4.2% of their wages (up to $106,800) will be withheld for Social Security tax purposes instead of the regular 6.2%.  Government employees who do not pay into Social Security do not benefit from the payroll tax cut reduction and the new law does not make up for this with a cash payment or separate tax reduction.  For self-employed individuals, the 2011 self-employment tax rate will be 10.4% instead of the usual 12.4%. (The 10.4% is the total of the 4.2% share of the social security tax for employees plus the 6.2% employer share, which is not reduced by the new law).  The Medicare component of FICA remains 1.45% for employees and 2.90% for self-employed individuals. 

Strategy:  Set-up an individual retirement account and have 2% of your wages automatically transferred every month into it.  You are not used to needing that extra 2% for living expenses, why not have it go towards building your nest egg.

Extenders for 2010 returns.  Several tax breaks that expired at the end of 2009 are extended to 2010 and 2011.  These include:  the above-the-line deduction for tuition and fees , the first $250 of educator expenses, and the itemized deduction for state and local sales taxes that can be claimed instead of state and local income taxes.

The rule allowing individuals age 70 ½ and older to exclude from income up to $100,000 of IRA distributions that are directly transferred to charity has been extended to 2010 and 2011.  The new law did not extend 2 additions to the standard deduction that applied for 2009.  On 2009 returns, the standard deduction could be increased by state and local property taxes paid up to $500 or $1,000 (joint) as well as by a 2009 net disaster loss from a federally declared disaster.

AMT for 2010 and 2011.  To keep the AMT exemption from falling and forcing over 20 million taxpayers to pay the AMT, an annual “patch” has been necessary.  The new law increases the exemption for 2010 to $72,450 for married couples filing jointly, $47,450 for single taxpayers and heads of households, and $36,225 for married persons filing separately.    For 2011, the exemptions will be $74,450 for married filing jointly, $48,450 for single and heads of household, and $37,225 for married persons filing separately. 

Child Tax Credit and other tax credits.  The child tax credit had been scheduled to drop from $1,000 per qualifying child in 2010 to $500 starting in 2011, but the new law extends the $1,000 credit through 2012.  The American Opportunity credit of up to $2,500 of qualified tuition and fees per student for up to 4 years of post-secondary education expired at the end of 2010, but the new law extends it to 2011 and 2012.  The new law also extends to 2011 and 2012 the dependent care credit.  The credit for home energy savings improvements such as windows, doors, insulation will be lower in 2011 than it was for 2009 and 2010.  The 30% credit rate will fall to 10%and the maximum credit drops from $1,500 to $500, with lower caps for specific items, such as$200 for windows and $150 for furnaces or hot water boilers.  Prior credits can eliminate the credit; the $200 windows limit and overall $500 limit are reduced by all credits claimed after 2005.

Bush individual tax rates and capital gains/dividend rates extended.  Without the new law, in 2011 the 10% and 25% individual tax rates would have disappeared and the top 2 brackets would have gone from 33% and 35% to 36% and 39.6%.  The new law keeps the rates on ordinary income at 10%, 15%, 25%, 28%, 33%, and 35% through 2012.  The 0% and 15% rates on long-term capital gains and qualified dividends are also extended through 2012.

Estate Tax restored for 2011 and 2012.  The federal estate tax is reinstated for 2011 and 2012 with a $5 million exemption and a top rate of 35%, and stepped -up basis allowed for the inherited assets.

7 New Tax Breaks that Most People will Miss

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This coming tax season features more changes, deductions, and credits than any other year I have seen in my nine year career.  For that reason, many people who do not know of all the possible deductions and credits they are eligible for will cost themselves a significant amount of money.  I have listed six of those tax law changes below and included a brief description. 

1. Energy Efficiency Credit. If you purchased windows, doors, a furnace, boiler, water heaters, or insulation you may be eligible for a deduction up to 30% of the costs up to $1,500. Energy star ratings apply and more information/qualifications can be found at http://www.energystar.gov/index.cfm?c=tax_credits.tx_index -or- http://www.irs.gov/newsroom/article/0,,id=211307,00.html

2. Sales Tax Deduction on a New Vehicle Purchase. If you purchased a new vehicle you can use the sales tax you paid as a deduction on your tax return. Previously, sales tax was deductible but only if it exceeded your state income tax, so most people did not benefit from it. At tax time: bring your sales receipt(vehicle price, sales tax paid, and dealership information.

3. Excluded Unemployment Benefits. If you received unemployment benefits in 2009 the first $2,400 received will be considered excluded from your 2009 federal return (not Minnesota return).

4. Increased Education Credit. If you or your dependent paid qualified education expenses this year you may be eligible for an increased maximum Hope education credit of $2,500. The Hope credit has now been made available for four years of higher education as opposed to just two in the past.

5. First Time Homebuyer Credit. This credit has been extended until April 2010 and offers first time homebuyers a tax credit of $8,000 on their taxes. In addition, taxpayers who have lived in a home for five of the past eight years are also eligible for a credit of $6,500. A frequently asked questions page regarding these credits are available at www.bergersontax .com or more information at irs.gov.

6. Making Work Pay Credit. Individual with earned income may have received a tax credit of $400 or $800 for married filing jointly. They received this credit through their employer throughout 2009. This will have a negative result for the taxpayers at tax time as their refunds will be reduced by this much or their balance due will be increased.

7.       Conversion of IRAs to ROTH IRAs allowed in 2010.  Some individuals are given the opportunity to convert their traditional or rollover IRAS into ROTH IRAS thus creating after tax dollars allowing for tax deferred and tax-free accounts.  More information on this great opportunity is available on our website at  http://bergersontax.com/tax-form/2009/10/21/great-opportunity-to-save-taxes-thanks-to-legislation-changes/

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