This video is just one in a series that will help entrepreneurs and business owners with their small business tax preparation. Today we'll talk about:
Affordable Care Act & Health Savings Accounts
Section 179 (expensing fixed assets)
Long-term Capital Gains Rates
Watch the video or read the post to find out about 2014 general tax information for small businesses:
When you have surgery, operations, or other medical procedures that are outside of your insurance coverage, you are able to write-off those expenses on your tax return.
Changes this year: In the past, you could write off any medical expenses that exceeded 7.5% of your income. However, this percentage has gone up to 10%.
So if your income was $100,000 in 2014, you'd have to have over $10,000 of medical expenses to be able to deduct them from your 2014 tax return.
If you are unable to itemize deductions (you don't have enough), then you can use the standard deductions.
For 2014 Married Couples: the standard deduction is $12,400.
For 2014 Single People: the standard deduction is $6,200.
2014 Mileage Rate
For 2014, the reimbursable mileage rate is $0.56/mile.
Retirement Contributions 401k
The max you can contribute out-of-pocket to your 401k for 2014 is $17,500.
Affordable Care Act & HSA
The amount you can put into your HSA (health savings account) tax free for 2014:
Section 179: Expensing Fixed Assets
You can expense any fixed assets you purchased in 2014 up to $500,000.
Long-term Capital Gains Rates
People in the 39% tax bracket will have to pay 20% on long-term capital gains rates, rather than 15%.
The amount you can gift, tax free, to any individual for 2014 is $14,000.
Ryan: Hi, I’m Ryan Steck, I’m the lead CPA here at Ignite Spot.
Ann: And I’m Ann Whittaker and I’m in the marketing department.
Ryan: Today we’re going to go over some exciting things you need to know about your 2014 taxes. These are the general things that change every year or the things that everyone has questions about every single year when going into tax season. These are things you need to know Justin general to file your tax return.
Ann: So these will affect most everybody. This is why it’s a general question.
Ann: So everyone wants to know this.
Ryan: Exactly. So some of the things some people might want to know, some of the things you won’t, but there’s something in here [everyone will want to know] when filing your tax return this year.
Ryan: So let’s start by talking about some of the general things that have changed: itemized deductions. Itemized deductions are the ability to go in and deduct some personal expenses that we have in our lives such as: charitable contribution, mortgage interest rates, real estate taxes, we’ve all had these things. Another category that’s an itemized deduction is medical expenses.
Ryan: And so when you have medical expenses for surgeries, operations, outside of insurance whatever it might be, those expenses get to be itemized. But there’s a catch with it.
Ryan: In years past you’ve been able to deduct those medical expenses, as long as it’s more in medical expenses than 7.5% of your income.
Ann: Ok, so you’re going to have to do a little math here.
Ryan: So if you make 100,000 dollars in a year, you have to have more than 7,500 hundred dollars in medical expenses to qualify to get this itemized deduction.
Ann: Ok. Good to know.
Ryan: That’s the past.
Ryan: That rule just changed. And unfortunately it didn’t change for the good. And so going forward that number’s now 10% instead of 7.5%. And so that’s one of the changes we’re going to have for this year. For your medical expenses: you have to have a lot if you’re going to get any advantage for those expenses on your tax return.
Ryan: So let’s say you don’t itemize on your tax return and that you take the standard deduction. What the standard deduction is what the government gives you free and says: “We’re going to reduce your taxes by a certain amount. We’re going to give you a certain amount of deduction for free.”
Ryan: If you can’t itemize, you don’t have enough, then you get these standard deductions. For 2014, the standard deduction for married people is $12,400 and for single people it’s $6,200.
Ryan: Ok so the next thing let’s talk about is mileage. Every year people want to know what’s the reimbursable mileage rate. The government changes that every year and sometimes they change it twice in a year. For 2014 we’re pretty lucky in that they only changed it once. And so for 2014, the mileage reimbursement rate is .56 cents a mile.
Ann: Ok. And is that for personal use cars or business cars only? How does that work?
Ryan: Great question. So the government doesn’t distinguish between a business and a personal vehicle. Mileage driven for business purposes in mileage that is deductible.
Ryan: Ok, retirement planning. Every year it seems like the government has indexed up a little bit the amount you can contribute to your 401k and general retirement plans. In 2014, for whatever reason, that didn’t happen. So for 2014, your 401K out of pocket max you can contribute into the plan is $17,500. Much like it was the year before.
Ann: And does that include if your company matches? Or is that just your personal contributions?
Ryan: That’s your personal contributions into the plan.
Ryan: Alright, with the introduction of Obamacare [Affordable Care Act], we’ve had lots of changes to our health insurance plans. There’s not a person out there who has health insurance coverage who doesn’t notice a difference in their plan. Whether they’re having to pay more in premiums, their deductible is a little higher, the plans just look a little different than they did before Obamacare. Now that Obamacare’s in place, Health Savings Accounts are becoming more of a hot ticket item. And what those are is your ability to contribute into a savings account for yourself for health expenses tax-free. So on a pre-taxed basis.
Ryan: So for 2014, the amount you can put into an HSA, or Health Savings Accounts as they call them, is $6,550 for a family.
Ryan: Or $3,300 for a single individual.
Ann: Ok, so with the family that’s: spouse, kids, everyone.
Ryan: Everyone. So that’s the max you can put in, on a pre-taxed basis, to cover medical expenses, in any given year.
Ryan: Alright, we’ve talked before about tax extenders. One of the big tax extenders that was out there that we were waiting on was Section 179. Section 179 is your ability to expense fixed assets that you purchased in any given year.
Ann: Got it.
Ryan: The law was set to take that down to $25,000 a year for 2014. It just got a patch on it, so that amount is now $500,000 for 2014.
Ann: Oh, nice.
Ryan: So any fixed assets that you bought for 2014 that are under $500,000 in value, you can basically expense those if you’d like.
Ann: Ok. So $500,000, great.
Ryan: There’s some caveats that we won’t go into today, but in general: $500,000’s your rule.
Ryan: Long-term capital gains rates: for a lot of years has been a pretty fixed number so if you’ve held stock or assets for a long period of time, just know that you’re going to pay to the IRS 15% of your gains on the sale of whatever it is.
Ryan: That’s still basically the rule, but there is another caveat and another layer that’s been added this year. And what that layer is is anyone who qualifies now as a wealthy individual in the new tax rate which is 39%. I know, good gracious, it’s getting higher and higher. But people that are in the 39% tax bracket now will pay capital gains rates at 20%. So the 15% is gone for them.
Ryan: Ok and finally the last thing that we’ve got as a general update is gifting. There’s a lot of parents, a lot of family, and a lot of situations where people like to gift money and not have a tax consequence for it. That number changes a little bit every year and for 2014 the amount that you can gift, tax free without any tax consequences, is $14,000 per person.
Ryan: And what that means, just as a clarification, it doesn’t mean that as an individual I can only receive $14,000 in gifting. It means that as a gifter, I can only gift to one person $14,000 a year.
Ann: Ok. But you can gift to multiple people $14,000 each.
Ryan: I sure can. But I can only do it, per person, $14,000 at a time.