IRS ANNOUNCES ADJUSTMENTS FOR INFLATION

The IRS has announced the 2014 inflation adjustments for over 40 tax provisions, including the income tax
brackets.  The adjustments that affect most taxpayers are the following -

• 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 from $8,950 to $9,100.
• The amount that can be claimed for itemized deductions begins to be reduced for singles with incomes of $254,200 or more or $305,050 for married couples filing jointly.
• The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. The exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 for singles and $305,050 for married couples filing jointly. It phases out completely for singles at $376,700 and $427,550 for married couples filing jointly.

Many items remain unchanged, including:

• The annual exclusion for gifts remains at $14,000 for 2014.
• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $17,500.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan remains unchanged at $5,500.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

 If you have questions/concerns about how the adjustments will affect you, please call Turner's Tax Service at 530-626-8551 and we'll be happy to discuss your individual situation with you.