IRS ADJUSTS 2014 TAX BENEFITS FOR INFLATION

Washington, D.C. -- The Internal Revenue Service issued its annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes for 2014.

Revenue Procedure 2013-35 provides details about the various annual adjustments. The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts:

The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively.

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 to $9,100, up from $8,950. Detailed inflation adjustments can be found in Revenue Procedure 2013-35, which was due to be published in Internal Revenue Bulletin 2013-47 in mid-November.

 

TREASURY RELAXES 'USE OR LOSE' FOR HEALTH ACCOUNTS

Washington, D.C. -- The Treasury Department and the Internal Revenue Service have loosened the "use it or lose it" rule for flexible spending arrangements for health care, allowing participants in health benefit plans to carry over up to $500 from their FSA from year to year. The goal is to make health FSAs more consumer-friendly and provide added flexibility. As part of the Affordable Care Act, the federal government limited the amount of money that could be put into an FSA to $2,500 a year, and the new rule would encourage a greater number of workers to take advantage of FSAs without worrying that they will lose the money they put into the accounts. However, it will be up to the employer to decide whether or not to offer this option to employees. Most employers have traditionally been able to hold onto any money left by employees in their FSA accounts.

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