Just like another year has come and gone, there is a handful of
tax laws that will come and go starting on January 1, 2014. Some of the
changes are due to expiring laws that were enacted in an attempt to spur
economic growth during the most recent recession - others were caused
by new legislation, namely the Affordable Care Act, or otherwise known
as Obama Care.
The first and by far the most widely discussed tax
law change is related to the new health care law. The main component of
the law that will effect taxpayers is the individual mandate requiring
individuals to purchase health insurance or receive a penalty. First and
foremost, you will not be penalized for not carrying insurance until
you file your 2014 tax return in early 2015, this goes for all laws that
take effect starting in 2014.
But if you do not carrying
qualified minimum coverage by March 31, 2014 you will start to incur a
penalty that can amount to either $95 dollars per adult + 47.50 per
dependent in your household, or 1% of total household income, whichever
is greater. The cap of the penalty is annual cost of a bronze rated
insurance plan for you or your family. As mentioned earlier, this
penalty would be collected when you file your 2014 return in early 2015 -
via a refund reduction or an adjusted balance increase if no refund was
due.
One common tax deduction that is going away will have an
adverse affect on some teachers, this will cause a likely tax increase
during 2014 because Congress is not extending the tax deduction that
allowed teachers to write off up to $250 dollars of their classroom
expenses. Up until now, this deduction was considered above the line, or
taking a deduction without itemizing. Since nearly 75% of taxpayers do
not have enough deductions to itemize - this could have an impact on a
number of teachers nationwide.
Another deduction that is going
away is the PMI deduction. Since 2010, homeowners who pay mortgage
insurance premiums have been able to deduct them along with the interest
they pay on their home loans. This will be no more starting January 1.
Homeowners who put down less than 20% during the home purchase process
were required to carry this type of mortgage insurance. That being said,
mortgage interest and real estate taxes are still deductible in 2014 as
an itemized deduction - resulting in homeowners being able to deduct
much more than if they rented their home or apartment.
One
exemption that is going away but is not getting much attention right now
is the primary residence cancellation of debt exclusion. Homeowner's in
recent years, who had mortgage debt forgiven by a lender via short sale
have been exempted from paying tax on the forgiven debt. This provision
was passed to improve liquidity and stabilization in the housing market
a few years back, but wasn't extended through to 2014. Going forward,
distressed homeowners may possibly have to include forgiven debt as
income in that given tax year. This could have a huge impact on the
number of distressed properties that change hands nationwide - and will
dramatically increase the tax liability of homeowners who have all, or a
portion of their debt forgiven.
Tax Law Changes for 2014
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