Our Individual IncomeTax

Do you remember the thrill, when a great teacher helped you understand a difficult subject and you felt like you were in control? Experience that thrill again with your taxes and put some cash in your pocket! This article can only cover the tip of the iceberg. Contact me today to learn all about your own taxes and how to keep them low. IIf you have an interested group, call me for a great one hour seminar on this subject

WHAT’S NEW:   There is a group of laws that Congress has been unable to pass permanently because permanent passage would harm tax revenues.Well Congress has  finally passed them for longer periods  These rules included: the itemized deduction for state sales tax and the deduction for up to $250 of educators’ classroom supplies. Also the exclusion for up to $2 million of forgiven debt on primary homes and the ability of folks age 70½ and older to make direct payouts of up to $100,000 from IRAs to charity.  Each year, I keep watch!

High-income taxpayers

Income taxpayers are really feeling the pain of new and higher tax rates. Why? A new 39.6% rate on taxpayers who are joint filers with a taxable income of $466,950, and single filers with $415,050.

For investor there is the new3.8% tax on net investment income.Coupled with the 3.8% NIIT, the top rate on ordinary income could be as high as 43.4% this year.J. The 3.8% SURTAX applies to the lesser of (a) net investment income or (b) the excess of modified adjusted gross income over “modified adjusted gross income” where it exceeds, $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for other taxpayers. Investment income includes interest, dividends, capital gains, annuities, royalties and passive rental income. See Form 8960

 The 2010 Health Care Act added the additional 0.9% Medicare tax  on wages and self[1]employment income in excess of modified AGI threshold amounts: $250,000 (joint filers), $125,000 (married separate filers), and $200,000 (single and HOH filers).

A. FILING STATUS controls tax rates, Standard Deductions and many other tax items.

B. IRA CONTRIBUTION: $5,500; $1,000 catchup contribution for age 50
C. 401K CONTRIBUTION: $18,000; $6,000 catchup contribution for age 50

D. STANDARD DEDUCTIONS in 2014 (if one is not deducting itemized deductions) are:
1. Joint filers $12,600
2. Heads of household $9,300
3. Singles $6,300
4. Marrieds filing separately $6,300
5. For the aged or the blind the additional standard deduction amount is $1,250, increased to $1,550 if the individual is also unmarried and not a surviving spouse.

E. ITEMIZED DEDUCTIONS phase out by an amount equal to 3% of the excess of AGI over “threshold amounts” below.

F. PERSONAL EXEMPTION: For each dependent, this deduction is $4,000 but it phases out, reduced by an amount equal to 2% for each $2,500 ($1,250 for married separate), or part of it, by which AGI exceeds that taxpayer’s THRESHOLD AMOUNT.

G. PERSONAL EXEMPTIONS,  ITEMIZED DEDUCTIONS PHASEOUT BEGINS & END AT:
Joint Returns, Surviving Spouses $309,900-$432,400
Heads of Households $284,050-$406,550
Unmarried Individuals (not Surviving $258,250-$380,750
Spouses or Heads of Households)
Married Filing Separate Returns $154,950-$216,200

H. TAX RATES.  law retains 2012 tax rates but added a new highest 39.6% rate. See the previous page.

I. CAPITAL GAINS and QUALIFIED DIVIDENDS: investments held 12 months and domestic corporation dividends are taxed at lower rates: 0% if you are in 10-15% regular tax brackets, 15% if in 25-35% brackets and 20% for taxpayers in 39.6% bracket.

J. AN ADDITIONAL 3.8% SURTAX applies to the lesser of (a) net investment income or (b) the excess of modified adjusted gross income over “modified adjusted gross income” exceeds, $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for other taxpayers. Investment income includes interest, dividends, capital gains, annuities, royalties and passive rental income. Form 8960.

K. AN ADDITIONAL 0.9% MEDICARE TAX is imposed on individual on wages in excess of $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for others.

 

About Wis Laughlin

I help clients with tax preparation and IRS representation, estate planning, and complex contracts, including LLC's. As a former IRS tax attorney in their National Office. Law.com picked Wis in 2017 and several prior years as one of the Top Tax and Estate Lawyers in Tennessee. I am your advocate, not your accountant. I don't tell you what you can't do. I show you how to do it.
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