2014 Tax Tips - Overview of Changes to Credits and Deductions

Nov. 20, 2013 -- The IRS defense company TaxAudit.com has released its annual end-of-year tax tips for U.S. taxpayers. The company represents about 20,000 taxpayers each year during income tax audits.

Reminders for fourth quarter tax planning:

  • Know your tax rate: While ordinary federal income tax rates for 2013 will remain the same, the fiscal cliff legislation passed earlier this year affects higher-income individuals and puts them in the 39.6% tax bracket (up from 35%).
  • Consider leveraging itemized deductions by bunching deductible expenditures every other year, while taking the standard deduction in intervening years.
  • Consider deferring income if you expect to be in the same or lower tax bracket for 2014.
  • Consider the tax impact of selling appreciated securities by timing your investment gains and losses. Selling some loser securities before year end may also be a smart tax strategy.
  • Take advantage of the special tax breaks available to you if you make charitable contributions directly from your IRA; special rules apply.
  • Remember that significant lifestyle changes like divorce, a job change, retirement or becoming a home buyer affect your taxes.
  • Spend down flexible spending accounts before those balances expire.
  • Go green: Purchasing energy-efficient appliances can mean big tax credits.
  • Changes to IRS tax laws effective for 2013 - know which changes affect you:

Rules for home office deductions have also changed. New this year is a simplified option for a maximum standard $1,500 deduction. Also, rules for depreciation have changed, many refundable credits are disappearing, and a new 3.8% Medicare Investment Tax and a 0.9% Medicare Health Insurance Tax will affect many higher-income individuals due to recently enacted health care legislation.

Tax provisions expiring after 2013:

For individuals:

  • Above-the-line deduction for certain expenses of elementary and secondary school teachers.
  • Deduction for state and local sales taxes.
  • Above-the-line deduction for qualified tuition and related expenses.
  • Deduction for mortgage insurance as qualified interest.

For businesses:

  • Research and experimentation tax credit.
  • Work opportunity tax credit.
  • Increase in expensing to $500k/$2M and expansion of definition of $179 property.
  • 15-year straight-line cost recovery for qualified leasehold, restaurant and retail improvements.

Note that these tips are best taken advantage of in consultation with a tax professional such as a CPA or EA.

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