Important Tax Law Changes for 2014 (Part II)

In Part I of our series, we looked at a few of the tax breaks that were reduced or eliminated at the start of 2014. Now let’s look at some of the additions to the tax code taking affect this year.

Individual Mandate to Purchase Health Insurance: Despite attempts to delay and/or eliminate it, the Individual Mandate provision of the Affordable Care Act of 2010 has survived and is effective as of 2014. This means that all Americans (with the exception of a few that are exempted) are required to purchase health insurance, or pay a fine to the IRS. The deadline to purchase insurance is March 31, 2014.

All Married Couples Can File Jointly: In 2013, the Supreme Court struck down the Defense of Marriage Act. In doing so, they cleared the way for same-sex couples to receive equal treatment with married heterosexual couples under the federal tax code. This means that same-sex couples are now responsible to either file jointly or married filing separately, regardless of whether or not their individual state recognizes same-sex marriage. This, however, does not change the filing status on a state return. So in states that do not recognize same-sex marriage, the couple may need to file separate state tax returns as single individuals.

Streamlined Small Business Home Office Deduction: There is a new tax break in 2014 for small business owners that qualify for the home office deduction. Up until now, home-based entrepreneurs have had to spend hundreds of thousands of combined man-hours annually keeping records of expenses related to the home office deduction. The IRS is now allowing home-based businesses to simplify this process by deducting a fixed amount based on the number of square feet within your home office.

The deduction is $5 per square foot, up to a total of 300 square feet or a $1500 deduction. So instead of calculating the percentage of the home for mortgage/rent, utilities, and other related expenses, all that is needed is the number of square feet within the home office multiplied by $5. It should be noted, however, that you still have the option to calculate your home office deduction the long way if it would be to your benefit.

There are numerous other changes to the tax code in 2014 affecting various life activities and income levels. Speak to your tax professional to learn which changes will impact you personally and how to properly plan for 2014.

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