Call Accurate Tax @ 630-761-8020 or contact us today and we will guide you through questions related to any of the new Illinois State and IRS Federal tax laws.
3.8% Net Investment Income Tax
Starting in 2013, individuals are subject to a net investment income tax
equal to 3.8% of the lesser of:
- Net Investment Income (NII) or
- The excess (if any) of modified adjusted gross income over the threshold amount.
The threshold amounts according to filing status are:
- $250,000 for Married filing joint, or Qualifying widower
- $200,000 for Single, or Head of Household
- $125,000 for Married filing separate
Additional 0.9% Medicare Tax
Starting in 2013, wages and self-employment income are subject to a 0.9% additional Medicare tax to the extent they exceed the following thresholds:
- $250,000 for Married filing joint
- $200,000 for Single, or Head of Household, or Qualifying Widower
- $125,000 for Married filing separate
Student Loan Interest Deduction
The maximum amount of student loan interest that may be deducted is $2,500. The deduction is phased-out when modified adjusted gross income falls within the range of $130,000 – $160,000 for married filing joint, and $65,000 – $80,000 for all others except no deduction for Married Filing Separate.
Effective September 16, 2013, individuals in a same-sex marriage will be treated as married for all federal tax purposes, including income, gift and estate taxes. Same-sex couples who are legally married in jurisdictions that recognize their marriage will be treated as married for this rule.
Individuals in registered domestic partnerships, civil unions or similar formal relationships recognized under state law are NOT considered married for federal tax purposes.
American Opportunity Credit
- Maximum credit is $2,500 per eligible student per year (100% of the first $2,000 and 25% of the next $2,000 of eligible expenses).
- Eligible expenses include tuition and fees, plus course materials (books, supplies, and related equipment required for enrollment or attendance at an eligible educational institution).
- Allowable for the first 4 years of post-secondary education in a degree or certificate program.
- Phase out ranges: $160,000 – $180,000 for married filing joint, and $80,000 – $90,000 for all others except married filing separate who do not qualify.
In 2014, the combined contribution limit is $5,500 and $6,500 if 50 or older. IRA contributions must be made by the due date of the return, not including extensions, i.e., April 15, 2015. Salary deferral limits for 401(k), 403(b), SARSEP, 501(c)(18)(D), is $17,500. Catch-up contributions $5,500.
Child Tax Credit
The child tax credit remains at $1,000 per “qualifying child” under the age of 17. The credit is phased out beginning at $110,000 for Married Filing Joint, $75,000 for Single and Head of Household, and $55,000 for Married Filing Separate.
Non-Cash Contributions: No charitable deduction is allowed for any contribution of clothing or a household item unless the clothing or household item is in good used condition, or better. Household items include furniture, furnishings, electronic, appliances, linens, and other similar items. Household items do not include food, paintings, antiques, jewelry and gems, or collections.
Cash Contributions: A charitable contribution deduction will be disallowed for any monetary contributions (cash, check, etc.) unless the donor maintains a record of the contribution. The record of the contribution must be in the form of a bank record, cancelled checks, or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution. This provision applies to any contribution of money, regardless of the amount.
Deduction for Mortgage Insurance Premium
Premiums paid or accrued by a taxpayer for qualified mortgage insurance in connection with acquisition indebtedness on a taxpayer’s primary or second home are deductible as residence interest.
- Only amounts paid on mortgage insurance contracts issued after 2006 qualify.
- Adjusted gross income no greater than $109,000 ($54,500 for MFS)
- Extended for 2014
Mortgage Forgiveness Debt Relief Act of 2007
Homeowners may exclude from gross income “qualified principal residence indebtedness” cancelled during 2007-2014. Debt forgiveness on a second home, credit cards, or car loans does not qualify for this exclusion.
Capital Gains and Losses
The 15% maximum rate on long-term capital gains and qualified dividends applies to the extent taxable income does not exceed $406,750 (single), $432,200 (HOH), $457,600 (MFJ) and $228,800 (MFS). When taxable income exceeds these amounts, a 20% rate applies.
Dependent Care Credit
The maximum dependent care credit remains at $1,050 (35% x $3,000) for one qualifying individual, and $2,100 (35% x $6,000) for two or more through 2014.
All information on this page is provided as a brief summary and not considered binding authority.