Well, it is a New Year. And one of the joys of a New Year is new tax laws. So just in time for New Year’s fun, here is a brief look at tax changes for 2014:
- Federal Estate Tax. For persons dying on or before December 31st, 2013, the exclusion amount is $5.25M. On January 1st the exclusion for the unified estate, gift, and GST tax rises to $5,340,000. Parenthetically, because of the way that the tax is applied there is a potential trap that may be looming here for some. Check back in coming weeks and I will write on that.
- Gift Tax Exclusions. The annual gift tax exclusion remains at $14,000 for 2014, but the exclusion for gifts to non-citizen spouses increases to $145,000.
- NC Income Tax. The tiered income tax system (2013 bracket-rates are 6, 7, & 7.75%) are replaced with a flat rate of 5.8% in 2014, falling to 5.75% in 2015. Personal exemptions are eliminated, but the standard deductions are increased. All charitable contributions deductible for federal purposes are still allowed by NC. The $50,000 deduction on certain business income is gone. The corporate tax rate is falls from 6.9% in 2013 to 6% in 2014 and 5% in 2015.
- New NC Service Taxes. However, NC Sales tax will now be applied to service contracts for automobiles and appliances, movie tickets, and event tickets (other than school events and agricultural fairs).
- Roth IRA Limits. For 2014 Roth IRA income limits for contributions are $114,000 for single filer and $181,000 for married joint filers.
- Traditional IRA Limits. The limit on IRA contributions remains $5,500 for 2014.
- Mileage Deduction. Starting January 1st, 2014 the standard mileage rate for the use of a car (van, pickup, or panel truck) will be 56 cents per mile for business miles driven, 23.5 cents per mile for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations. The business and medical/moving rates are based upon an annual study by the IRS and have decreased from 2013. The charitable rate is based upon statute. Taxpayers have the option of calculating and deducting the actual costs of using the vehicle rather than using the standard rate, but cannot use the standard rate after deducting depreciation for a vehicle.
- Foreign Earned Income. The exclusion is increased to $99,200 for 2014. US taxpayers who receive inheritances or gifts over $100,000 in 2014 from foreign estates or nonresident aliens must file a return, as do citizens who receive foreign gifts in excess of $15,358 from foreign corporations or partnerships.
Tax laws are in near-constant flux–just part of the fun that is life. And one of the reasons that even a good estate plan needs to be periodically reviewed. It is also a good reason to build flexibility into both estate plans and business arrangements. We are pleased to be able to offer our clients assistance in these matters, in order to help you preserve and protect what is yours. Call our office today to learn how we may help you navigate through these tax laws and other estate planning and business issues. (704) 784-0846