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Tax Law for the Closely-Held Business

2014 Inflation Adjustments

Posted in Federal Tax Issues

The IRS recently announced its annual inflation adjustments for 2014, which will cover more than 40 tax provisions.  Notably, the following adjustments will be made for 2014:


  • The maximum tax rate of 39.6% will affect singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively.


  •  The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.


  •  Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.


  •  The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).


Alternatively, certain provisions will not be subject to any annual inflation adjustments, including the annual exclusion for gifts, which remains at $14,000 for 2014, and the annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA), which remains unchanged at $2,500.