1040 Quickfinder Handbook (2014 Tax Year) Updates for the Tax Increase Prevention Act of Replacement Pages for Two-Sided (Duplex) Printing

Transcription

1 Quickfinder 1040 Quickfinder Handbook (2014 Tax Year) Updates for the Tax Increase Prevention Act of 2014 Replacement Pages for Two-Sided (Duplex) Printing Instructions: This packet contains marked up changes to the pages in the 1040 Quickfinder Handbook that were affected by the Tax Increase Prevention Act of 2014, which was enacted after the handbook was published. This is a specially designed update packet for owners of the 3-ring binder version of the handbook who have access to a printer that prints two-sided (duplex). Simply print the entire PDF file (make sure to select two-sided or duplex printing), three-hole punch the pages, and then replace the pages in your handbook. It s that easy.

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3 TAX PREPARATION 1040 Quickfinder Handbook 2014 Key Amounts Standard Deduction Earned Income Credit (Maximum) MFJ or QW 1... $ 12,400 No children... $ 496 Single ,200 1 child... 3,305 HOH ,100 2 children... 5,460 MFS ,200 >2 children... 6,143 Dependent ,000 3 Investment income limit... 3,350 Personal Exemption Kiddie Tax Threshold $3,950 $2,000 Gift Tax Annual Exclusion Elective Deferral Limits $14,000 SIMPLE IRA Plan Estate and Gift Tax Exclusion Amount < age $ 12,000 $5,340,000 4 age ,500 Standard Mileage Rates Business (k), 403(b) and 457 Plans Medical/moving < age $ 17,500 Charitable age ,000 Profit-Sharing Plan/SEP Contribution limit... $ 52,000 Compensation limit 5... $260,000 Health Savings Accounts (HSAs) Self-only coverage Contribution (deduction) limit... $ 3,300 Plan minimum deductible... 1,250 Plan out-of-pocket limit... 6,350 Family coverage Contribution (deduction) limit... $ 6,550 Plan minimum deductible... 2,500 Plan out-of-pocket limit... 12,700 Additional contribution amount if age 55 or older... $ 1,000 1 Add $1,200 for age 65 or older or blind, each. 2 Add $1,550 for age 65 or older or blind, each. 3 If greater, amount of earned income plus $350 (but not to exceed $6,200). 4 Plus the amount, if any, of deceased spousal unused exclusion amount. 5 For computing employer contributions. Form Tax Year 2014 Quick Tax Method MFJ, QW Taxable Income $ 0 $ 18, % minus $ 0.00 = Tax 18,151 73, minus = Tax 73, , minus 8, = Tax 148, , minus 12, = Tax 226, , minus 24, = Tax 405, , minus 32, = Tax 457,601 and over 39.6 minus 53, = Tax Single Taxable Income $ 0 $ 9, % minus $ 0.00 = Tax 9,076 36, minus = Tax 36,901 89, minus 4, = Tax 89, , minus 6, = Tax 186, , minus 16, = Tax 405, , minus 24, = Tax 406,751 and over 39.6 minus 42, = Tax HOH Taxable Income $ 0 $ 12, % minus $ 0.00 = Tax 12,951 49, minus = Tax 49, , minus 5, = Tax 127, , minus 9, = Tax 206, , minus 19, = Tax 405, , minus 27, = Tax 432,201 and over 39.6 minus 47, = Tax MFS Taxable Income $ 0 $ 9, % minus $ 0.00 = Tax 9,076 36, minus = Tax 36,901 74, minus 4, = Tax 74, , minus 6, = Tax 113, , minus 12, = Tax 202, , minus 16, = Tax 228,801 and over 39.6 minus 26, = Tax Note: Assumes taxable income is all ordinary income. High-income taxpayers may also be subject to the 3.8% tax on net investment income and/or the 0.9% additional Medicare tax on earned income. Caution: IRS Tax Tables must be used for taxable income under $100,000. To calculate the exact tax using the Quick Tax Method for taxable income under $100,000, round taxable income to the nearest $25 or $75 increment before using the formula. Round $50 or $100 increments up AGI Phase-Out Amounts/Thresholds Filing Status Tuition and Fees Deduction 1 Student Loan Interest Deduction Education Savings Bond Interest Exclusion Lifetime Learning Credit American Opportunity Credit Personal Exemptions MFJ $130,000 / $160,000 $130,000 $160,000 $113,950 $143,950 $108,000 $128,000 $160,000 $180,000 $305,050 $427,550 QW 65,000 / 80,000 65,000 80, , ,950 54,000 64,000 80,000 90, , ,550 Single 65,000 / 80,000 65,000 80,000 76,000 91,000 54,000 64,000 80,000 90, , ,700 HOH 65,000 / 80,000 65,000 80,000 76,000 91,000 54,000 64,000 80,000 90, , ,150 MFS Do Not Qualify Do Not Qualify Do Not Qualify Do Not Qualify Do Not Qualify 152, ,775 Itemized Saver s Earned Income Credit 3 Traditional IRA Roth IRA Net Investment Deductions 2 Credit 3 No Child 1 Child 2 Children >2 Children Deduction 4 Contribution Income Tax 6 MFJ $ 305,050 $ 60,000 $ 20,020 $ 43,941 $ 49,186 $ 52,427 $ 96,000 $116,000 $181,000 $191,000 $250,000 QW 305,050 30,000 14,590 38,511 43,756 46,997 96, , , , ,000 Single 254,200 30,000 14,590 38,511 43,756 46,997 60,000 70, , , ,000 HOH 279,650 45,000 14,590 38,511 43,756 46,997 60,000 70, , , ,000 MFS 152,525 30,000 Do Not Qualify , , ,000 1 Caution: Deduction expired 12/31/13, but has been reinstated in the past. Amounts shown are thresholds for $4,000 and $2,000 deduction, respectively. 2 Amount at which phase-out begins. 3 Amount at which phase-out is complete. 4 Phase-out only applies if taxpayer is covered by an employer retirement plan. For MFJ, phase-out range for non-covered spouse is $181,000 $191, Married individuals filing MFS who live apart at all times during the year are treated as single. 6 Amount at which tax begins. Replacement Page 1/2015

4 1040 Quickfinder Handbook 2014 Thomson Reuters/Tax & Accounting. All Rights Reserved. Quickfinder is a trademark of Thomson Reuters. ISSN ISBN P.O. Box Carrollton, TX Phone Fax tax.thomsonreuters.com The 1040 Quickfinder Handbook is published by Thomson Reuters. Reproduction is prohibited without written permission of the publisher. Not assignable without consent. The 1040 Quickfinder Handbook is to be used as a first-source, quick reference to basic tax principles used in preparing individual income tax returns. The focus of this handbook is to present often-needed reference information in a concise, easy-to-use format. The summaries, highlights, tax tips and other information included herein are intended to apply to the average individual taxpayer only. Information included is general in nature and we acknowledge the existence of many exceptions in the area of income tax. The information this handbook contains has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. The author/publisher is not engaged in rendering legal, accounting or other advice and will not be held liable for any actions or suit based on this handbook. For further information regarding a specific situation, see applicable IRS publications, rulings, regulations, court cases and Code sections. This handbook is not intended to be used as your only reference source Key Amounts Standard Deduction Earned Income Credit (Maximum) MFJ or QW 1... $ 12,600 No Children... $ 503 Single ,300 1 Child... 3,359 HOH ,250 2 Children... 5,548 MFS ,300 >2 Children... 6,242 Dependent ,050 5 Investment Income Limit... $ 3,400 Traditional IRA Deduction Phase-Out Begins at AGI of Elective Deferral Limits SIMPLE IRA MFJ, 4 QW 4... $ 98,000 < age $ 12,500 MFJ ,000 age ,500 Single , (k), 403(b) and 457 Plans HOH ,000 < age $ 18,000 MFS age ,000 Gift Tax Annual Exclusion Kiddie Tax Threshold $14,000 $2,100 Profit-Sharing Plan/SEP Contribution limit... $ 53,000 Compensation limit (for computing employer contributions) ,000 1 Add $1,250 for age 65 or blind, each. 2 Add $1,550 for age 65 or blind, each. 3 Noncovered spouse. 4 Covered by an employer retirement plan. 5 If greater, earned income plus $350, not to exceed $6,300. Updates For supplemental information to the material in this handbook, please refer to the Updates section of our website: tax.thomsonreuters. com/quickfinder. Join our Quickfinder Community Do you have a client-specific question? Visit tax.thomsonreuters. com/quickfinder. Click on Community to join. Post questions, comment on posts and share insights. You can also follow thought leaders, set community notifications, search for specific topics and even share files, links and videos. If you have any questions We welcome comments and questions from readers. However, our response is limited to verification of specific information presented in the Quickfinder Handbooks. We cannot give advice on a client s tax situation or provide information beyond the contents of this publication. Questions must be submitted in writing by mail, fax or online at tax. thomsonreuters.com/quickfinder (click on Content Questions). Research editors are not available to answer questions over the phone Quick Tax Method MFJ or QW Taxable Income $ 0 $ 18, % minus $ 0.00 = Tax 18,451 74, minus = Tax 74, , minus 8, = Tax 151, , minus 12, = Tax 230, , minus 24, = Tax 411, , minus 32, = Tax 464,851 and over 39.6 minus 54, = Tax Single Taxable Income $ 0 $ 9, % minus $ 0.00 = Tax 9,226 37, minus = Tax 37,451 90, minus 4, = Tax 90, , minus 6, = Tax 189, , minus 16, = Tax 411, , minus 24, = Tax 413,201 and over 39.6 minus 43, = Tax HOH Taxable Income $ 0 $ 13, % minus $ 0.00 = Tax 13,151 50, minus = Tax 50, , minus 5, = Tax 129, , minus 9, = Tax 209, , minus 20, = Tax 411, , minus 28, = Tax 439,001 and over 39.6 minus 48, = Tax MFS Taxable Income $ 0 $ 9, % minus $ 0.00 = Tax 9,226 37, minus = Tax 37,451 75, minus 4, = Tax 75, , minus 6, = Tax 115, , minus 12, = Tax 205, , minus 16, = Tax 232,426 and over 39.6 minus 27, = Tax Note: Assumes taxable income is all ordinary income. High-income taxpayers may also be subject to the 3.8% tax on net investment income and/or the 0.9% additional Medicare tax on earned income. Tax Rules By Age for 2014 Age Rule 13 Cannot claim a child care credit for children age 13 or older. 17 Cannot claim $1,000 child tax credit for children age 17 or older. 18 Children working for parents unincorporated business subject to FICA. Generally cannot contribute to an ESA for children age 18 or older. Adoption credit/exclusion generally unavailable for children age 18 or older. Qualifies for saver s credit (if not a dependent or a full-time student). Kiddie tax doesn t apply if child s earned income > than half his support. 19 Exemption for dependent children who are not full-time students expires. Kiddie tax generally no longer applies except to full-time students. 21 Children working for parents unincorporated business subject to FUTA. 24 Exemption for dependent children who are full-time-students expires. Can purchase savings bonds and exclude income used for education. Kiddie tax no longer applies. 25 Taxpayers with no children qualify for EIC. 27 Income exclusion for health insurance coverage and self-employed health insurance deduction for coverage of children age 26 and younger expires. 30 Generally must distribute ESA when beneficiary reaches age Eligible for catch-up contributions to IRAs, SIMPLE-IRAs, 401(k), 403(b) and 457 plans. Qualified public safety employees eligible for penalty-free withdrawals from a governmental defined benefit pension plan, if retired. 55 Eligible for penalty-free withdrawal from employer retirement plan (but not an IRA) if separated from service. Eligible for catch-up contributions to HSAs. 59½ Penalty for early withdrawal from retirement accounts expires. Roth IRA distributions are tax-free (if any Roth held for at least five years). 65 Non-itemizers become eligible for a higher standard deduction. Taxpayers with no children no longer qualify for EIC. HSA and MSA withdrawals not used for medical costs are taxed but no longer subject to a 20% penalty. Eligible for credit for the elderly. 7.5% (rather than 10%) of AGI threshold applies to medical expenses. 70½ Contributions no longer allowed to traditional IRAs. RMDs from retirement plans (other than Roth IRAs) must begin.

5 Quick Facts, Worksheets, Where to File All worksheets included in Tab 3 may be copied and used in your tax practice. Quick Facts Data Sheet... Page 3-1 Business Use of Home Worksheet... Page 3-4 Capital Loss Carryover Worksheet (2014)... Page 3-5 Child Tax Credit Worksheet (2014)... Page 3-5 Donations Noncash... Page 3-6 Donated Goods Valuation Guide... Page 3-6 Donations Substantiation Guide... Page 3-7 Earned Income Credit (EIC) Worksheet (2014)... Page 3-8 Net Operating Loss Worksheet #1... Page 3-9 Net Operating Loss Worksheet #2 Computation of NOL... Page 3-10 Net Operating Loss Worksheet #3 NOL Carryover... Page 3-10 Tab 3 Topics Quick Facts Data Sheet General Deductions and Credits Social Security Benefits Worksheet (2014)... Page 3-11 Reporting Capital Gains and Losses Form Page 3-12 Deduction for Exemptions Worksheet... Page 3-12 Itemized Deductions Worksheet... Page State and Local Sales Tax Deduction... Page 3-13 Health Coverage Exemptions... Page 3-13 Where to File 2014 Form 1040, 1040A, 1040EZ... Page 3-14 Where to File Form 1040-ES for Page 3-14 Where to File Form 4868 for 2014 Return... Page 3-14 Standard deduction: MFJ or QW $ 12,600 $ 12,400 $ 12,200 $ 11,900 $ 11,600 Single 6,300 6,200 6,100 5,950 5,800 HOH 9,250 9,100 8,950 8,700 8,500 MFS 6,300 6,200 6,100 5,950 5,800 Additional for age 65 or older or blind each (MFJ, QW, MFS) 1,250 1,200 1,200 1,150 1,150 Additional for age 65 or older or blind each (Single, HOH) 1,550 1,550 1,500 1,450 1,450 Personal exemption $ 4,000 $ 3,950 $ 3,900 $ 3,800 $ 3,700 Personal exemption and itemized deduction phase-out begins at AGI of: MFJ or QW $ 309,900 $ 305,050 $ 300,000 N/A N/A Single 258, , ,000 N/A N/A HOH 284, , ,000 N/A N/A MFS 154, , ,000 N/A N/A Earned income credit: Earned income and AGI must be less than (MFJ): 1 No qualifying children $ 20,330 $ 20,020 $ 19,680 $ 19,190 $ 18,740 One qualifying child 44,651 43,941 43,210 42,130 41,132 Two qualifying children 49,974 49,186 48,378 47,162 46,044 Three or more qualifying children 53,267 52,427 51,567 50,270 49,078 Maximum amount of credit (all filers except MFS): No qualifying children $ 503 $ 496 $ 487 $ 475 $ 464 One qualifying child 3,359 3,305 3,250 3,169 3,094 Two qualifying children 5,548 5,460 5,372 5,236 5,112 Three or more qualifying children 6,242 6,143 6,044 5,891 5,751 Investment income limit 3,400 3,350 3,300 3,200 3,150 Advance payment of health insurance premium tax credit repayment limit: 2 Household income < 200% of federal poverty line (FPL) $ 600 $ 600 N/A N/A N/A Household income 200% of FPL, but < 300% 1,500 1,500 N/A N/A N/A Household income 300% of FPL, but < 400% 2,500 2,500 N/A N/A N/A Household income 400% of FPL No Limit No Limit N/A N/A N/A Child tax credit: Credit per child $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 Additional (refundable) credit earned income floor 3,000 3,000 3,000 3,000 3,000 Adoption credit/exclusion: Maximum credit/exclusion (and amount allowed for adoption of special needs child) $ 13,400 $ 13,190 $ 12,970 $ 12,650 $ 13,360 Credit/exclusion phase-out begins at AGI of: All taxpayers except MFS $ 201,010 $ 197,880 $ 194,580 $ 189,710 $ 185,210 MFS Not Allowed Not Allowed Not Allowed Not Allowed Not Allowed Kiddie tax unearned income threshold $ 2,100 $ 2,000 $ 2,000 $ 1,900 $ 1,900 Foreign earned income exclusion $ 100,800 $ 99,200 $ 97,600 $ 95,100 $ 92,900 Table continued on the next page 2014 Tax Year 1040 Quickfinder Handbook 3-1

6 Quick Facts Data Sheet (Continued) FICA/SE Taxes Maximum earnings subject to tax: Social Security tax $ 118,500 $ 117,000 $ 113,700 $ 110,100 $ 106,800 Medicare tax No Limit No Limit No Limit No Limit No Limit Maximum tax paid by: Employee Social Security $ 7, $ 7, $ 7, $ 4, $ 4, Self-employed Social Security 14, , , , , Employee or self-employed Medicare No Limit No Limit No Limit No Limit No Limit Additional Medicare tax begins at earnings of: MFJ $ 250,000 $ 250,000 $ 250,000 N/A N/A Single, HOH or QW 200, , ,000 N/A N/A MFS 125, , ,000 N/A N/A Business Deductions Section 179 deduction limit $ 25,000 3 $ 500,000 $ 500,000 $ 500,000 $ 500,000 Section 179 deduction SUV limit (per vehicle) 25,000 25,000 25,000 25,000 25,000 Section 179 deduction qualified real property limit N/A N/A 250, , ,000 Section 179 deduction qualifying property phase-out threshold 200, ,000,000 2,000,000 2,000,000 2,000,000 Depreciation limit autos (1st year) 4 3, , , ,060 5 Depreciation limit trucks and vans (1st year) 4 3, , , ,260 5 Standard mileage allowances: Business / 55.5 Charity work Medical/moving / 23.5 Health Care Deductions/Exclusions Health savings accounts (HSAs): Self-only coverage: Contribution limit $ 3,350 $ 3,300 $ 3,250 $ 3,100 $ 3,050 Plan minimum deductible 1,300 1,250 1,250 1,200 1,200 Plan out-of-pocket limit 6,450 6,350 6,250 6,050 5,950 Family coverage: Contribution limit 6,650 6,550 6,450 6,250 6,150 Plan minimum deductible 2,600 2,500 2,500 2,400 2,400 Plan out-of-pocket limit 12,900 12,700 12,500 12,100 11,900 Additional contribution limit age 55 or older 1,000 1,000 1,000 1,000 1,000 Long-term care insurance deduction limits: Age 40 and under $ 380 $ 370 $ 360 $ 350 $ 340 Age Age ,430 1,400 1,360 1,310 1,270 Age ,800 3,720 3,640 3,500 3,390 Age 71 and older 4,750 4,660 4,550 4,370 4,240 Long-term care excludible per diem $ 330 $ 330 $ 320 $ 310 $ 300 Medical savings accounts (MSAs): Self-only coverage: Plan minimum deductible $ 2,200 $ 2,200 $ 2,150 $ 2,100 $ 2,050 Plan maximum deductible 3,300 3,250 3,200 3,150 3,050 Plan out-of-pocket limit 4,450 4,350 4,300 4,200 4,100 Family coverage: Plan minimum deductible 4,450 4,350 4,300 4,200 4,100 Plan maximum deductible 6,650 6,550 6,450 6,300 6,150 Plan out-of-pocket limit 8,150 8,000 7,850 7,650 7,500 Health flexible spending arrangement contribution limit $ 2,550 $ 2,500 $ 2,500 N/A N/A Education Tax Incentives Education savings accounts (ESAs) phase-out begins at AGI of: MFJ $ 190,000 $ 190,000 $ 190,000 $ 190,000 $ 190,000 Single, HOH, QW or MFS 95,000 95,000 95,000 95,000 95,000 Hope/American opportunity credit maximum credit (per student) $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 Lifetime learning credit (LLC) maximum credit (per return) $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 Education credit phase-out begins at AGI of: MFJ: Hope/American opportunity $ 160,000 $ 160,000 $ 160,000 $ 160,000 $ 160,000 LLC 110, , , , ,000 Single, HOH or QW: Hope/American opportunity 80,000 80,000 80,000 80,000 80,000 LLC 55,000 54,000 53,000 52,000 51,000 MFS Not Allowed Not Allowed Not Allowed Not Allowed Not Allowed Student loan interest deduction limit $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 Student loan interest deduction phase-out begins at AGI of: MFJ $ 130,000 $ 130,000 $ 125,000 $ 125,000 $ 120,000 Single, HOH or QW 65,000 65,000 60,000 60,000 60, Tax Year 1040 Quickfinder Handbook Replacement Page 1/2015

7 Quick Facts Data Sheet (Continued) MFS Not Allowed Not Allowed Not Allowed Not Allowed Not Allowed Savings bonds income exclusion phase-out begins at AGI of: MFJ or QW $ 115,750 $ 113,950 $ 112,050 $ 109,250 $ 106,650 Single or HOH 77,200 76,000 74,700 72,850 71,100 MFS Not Allowed Not Allowed Not Allowed Not Allowed Not Allowed Tuition deduction phase-out begins at AGI of: MFJ 6 $ 130,000 $ 130,000 $ 130,000 $ 130,000 Single, HOH or QW 6 65,000 65,000 65,000 65,000 MFS 6 Not Allowed Not Allowed Not Allowed Not Allowed Additional Taxes AMT exemption: MFJ or QW $ 83,400 $ 82,100 $ 80,800 $ 78,750 $ 74,450 Single or HOH 53,600 52,800 51,900 50,600 48,450 MFS 41,700 41,050 40,400 39,375 37,225 Child subject to kiddie tax earned income plus $ 7,400 $ 7,250 $ 7,150 $ 6,950 $ 6,800 Net investment income tax begins at AGI of: MFJ or QW $ 250,000 $ 250,000 $ 250,000 N/A N/A Single or HOH 200, , ,000 N/A N/A MFS 125, , ,000 N/A N/A Retirement Plans IRA contribution limits: Under age 50 at year end $ 5,500 $ 5,500 $ 5,500 $ 5,000 $ 5,000 Age 50 or older at year end 6,500 6,500 6,500 6,000 6,000 Traditional IRA deduction phase-out begins at AGI of (taxpayer or spouse covered by employer retirement plan): MFJ and QW (covered spouse) $ 98,000 $ 96,000 $ 95,000 $ 92,000 $ 90,000 MFJ (non-covered spouse) 183, , , , ,000 Single and HOH 61,000 60,000 59,000 58,000 56,000 MFS Roth IRA contribution phase-out begins at AGI of: MFJ or QW $ 183,000 $ 181,000 $ 178,000 $ 173,000 $ 169,000 Single or HOH 116, , , , ,000 MFS SIMPLE IRA plan elective deferral limits: Under age 50 at year end $ 12,500 $ 12,000 $ 12,000 $ 11,500 $ 11,500 Age 50 or older at year end 15,500 14,500 14,500 14,000 14, (k), 403(b), 457 and SARSEP elective deferral limits: Under age 50 at year end $ 18,000 $ 17,500 $ 17,500 $ 17,000 $ 16,500 Age 50 or older at year end 24,000 23,000 23,000 22,500 22,000 Profit-sharing plan/sep contribution limits $ 53,000 $ 52,000 $ 51,000 $ 50,000 $ 49,000 Compensation limit (for employer contributions to profit sharing plans) $ 265,000 $ 260,000 $ 255,000 $ 250,000 $ 245,000 Defined benefit plans annual benefit limit $ 210,000 $ 210,000 $ 205,000 $ 200,000 $ 195,000 Retirement saver s credit phased-out when AGI exceeds: MFJ $ 61,000 $ 60,000 $ 59,000 $ 57,500 $ 56,500 HOH 45,750 45,000 44,250 43,125 42,375 Single, MFS or QW 30,500 30,000 29,500 28,750 28,250 Key employee compensation threshold $ 170,000 $ 170,000 $ 165,000 $ 165,000 $ 160,000 Highly compensated threshold $ 120,000 $ 115,000 $ 115,000 $ 115,000 $ 110,000 Social Security Maximum earnings and still receive full Social Security benefits: Under full retirement age (FRA) at year-end, benefits $ 15,720 $ 15,480 $ 15,120 $ 14,640 $ 14,160 reduced by $1 for each $2 earned over Year FRA reached, benefits reduced $1 for each $3 earned 41,880 41,400 40,080 38,880 37,680 over (months up to FRA only) Month FRA reached and later No Limit No Limit No Limit No Limit No Limit Estate and Gift Taxes Estate and gift tax exclusion $ 5,430,000 7 $ 5,340,000 7 $ 5,250,000 7 $ 5,120,000 7 $ 5,000,000 7 GST tax exemption $ 5,430,000 $ 5,340,000 $ 5,250,000 $ 5,120,000 $ 5,000,000 Gift tax annual exclusion $ 14,000 $ 14,000 $ 14,000 $ 13,000 $ 13,000 1 Phaseout amount for all other filers (except MFS) is amount shown reduced by: $5,520 ($5,510 if no children) in 2015; $5,430 in 2014; $5,340 in 2013; $5,210 in 2012; $5,080 in For single filing status, the amount is half of the amount shown. 3 Amount has been raised by Congress many times in the past. Watch for developments. 4 Amount not released by IRS at publication time. Tax professionals should watch for developments. 5 Add $8,000 if special depreciation claimed. See Special Depreciation Allowance on Page 10-8 for potential application to Caution: Deduction expired 12/31/13, but could be reinstated for Watch for developments. 7 Plus the amount, if any, of deceased spousal unused exclusion amount. extended through 2014 Replacement Page 1/ Tax Year 1040 Quickfinder Handbook 3-3

8 Tax Year 1040 Quickfinder Handbook Business Use of Home Worksheet Caution: Schedule C filers must use Form 8829, Expenses for Business Use of Your Home, or claim the deduction computed under the simplified method on Schedule C, line 30. Use this worksheet if Schedule F is filed or if the individual is an employee (result to Schedule A) or a partner (result to Schedule E). Part 1 Part of Home Used for Business: 1) Area of home used for business... 1) 2) Total area of home... 2) 3) Percentage of home used for business (divide line 1 by line 2 and show result as percentage)... 3) % Part 2 Allowable Deductions: 4) Gross income from business... 4) (a) (b) Direct Expenses Indirect Expenses 5) Casualty loss... 5) 6) Deductible mortgage interest and qualified mortgage interest premiums... 6) 7) Real estate taxes... 7) 8) Total of lines 5 through ) 9) Multiply column (b) of line 8 by line ) 10) Add column (a) of line 8 and line ) 11) Business expenses not related to business use of home... 11) 12) Add lines 10 and ) 13) Deduction limit. Subtract line 12 from line ) 14) Excess mortgage interest and qualified mortgage insurance premiums... 14) 15) Insurance... 15) 16) Rent... 16) 17) Repairs and maintenance... 17) 18) Utilities... 18) 19) Other expenses related to use of home... 19) 20) Add lines 14 through ) 21) Multiply column (b) of line 20 by line ) 22) Carryover of operating expenses from prior year... 22) 23) Add column (a) of line 20, line 21 and line ) 24) Allowable operating expenses. Enter the smaller of line 13 or line ) 25) Limit on excess casualty losses and depreciation. Subtract line 24 from line ) 26) Excess casualty losses... 26) 27) Depreciation of home from line 39 below... 27) 28) Carryover of excess casualty losses and depreciation from prior year... 28) 29) Add lines 26 through ) 30) Allowable excess casualty losses and depreciation. Enter the smaller of line 25 or line ) 31) Add lines 10, 24 and ) 32) Casualty losses included on lines 10 and ) 33) Allowable expenses for business use of home. (Subtract line 32 from line 31.)... 33) Part 3 Depreciation of Home: 34) Smaller of adjusted basis or fair market value of home when first used for business... 34) 35) Basis of land (or FMV, if FMV of home used on line 34)... 35) 36) Depreciable basis of building (subtract line 35 from line 34)... 36) 37) Business basis of building (multiply line 36 by line 3)... 37) 38) MACRS depreciation percentage... 38) 39) Depreciation allowable (multiply line 37 by line 38)... 39) Part 4 Carryover of Unallowed Expenses to Next Year: 40) Operating expenses. Subtract line 24 from line 23. If less than zero, enter ) 41) Excess casualty losses and depreciation. Subtract line 30 from line 29. If less than zero, enter )

9 2014 State and Local Sales Tax Deduction 2014 can For 2013, taxpayers could elect to deduct state and local sales taxes instead of state and local income taxes (see Electing to Deduct Sales Tax on Page 5-5). Instead of deducting their actual expenses, taxpayers could use optional sales tax tables [based on the taxpayer s state(s) of residence] provided by the IRS. This election expired on December 31, It is possible that Congress will extend the election to 2014, but it had not done so at the date of publication. If the election to deduct state and local sales taxes in lieu of income taxes is extended to 2014, a deduction worksheet and any optional tables issued by the IRS will be posted to the Updates section of tax.thomsonreuters.com/quickfinder. The can Health Coverage Exemptions For 2014, individuals must have health care coverage, qualify for a health coverage exemption, or make a shared responsibility payment with their tax return. This chart shows all of the coverage exemptions available for 2014, including information about where the coverage exemptions can be obtained and the code for the coverage exemption that is to be used on Form 8965, Health Insurance Exemptions, when claiming the exemption. See Health Care: Individual Responsibility on Page 4-22 for more information. Coverage Exemption Granted by Marketplace Claimed on tax return Code for Exemption Coverage is considered unaffordable Individual cannot afford coverage because the minimum amount he must pay for premiums is more than 8% of his household income. A Short coverage gap Individual went without coverage for less than 3 consecutive months during the year. B Citizens living abroad and certain noncitizens Individual is: A U.S. citizen or resident who spent at least 330 full days outside of the U.S. during a 12 month period, A U.S. citizen who is a bona fide resident of a foreign country or U.S. territory, or Neither a U.S. citizen or U.S. national nor an alien lawfully present in the U.S. C Household income below the filing threshold The individual s household income is below the minimum threshold for filing a tax return. No Code See Part II 1 Members of a health care sharing ministry The individual is a member of a health care sharing ministry. D Members of Federally-recognized Indian tribes The individual is a member of a Federally-recognized Indian tribe. E Incarceration The individual is in a jail, prison, or similar penal institution or correctional facility after the disposition of charges. F Members of certain religious sects The individual is a member of a recognized religious sect. No Code See Part I 1 Limited benefit Medicaid and TRICARE programs The individual is enrolled in certain types of Medicaid and TRICARE programs that are not minimum essential coverage. (Available only in 2014.) H Fiscal year employer sponsored plan The individual was eligible, but did not purchase, coverage under an employer plan with a plan year that started in 2013 and ended in (Available only in 2014.) H Hardships: Two or more family members aggregate cost of self-only employer-sponsored coverage is more than 8% of household income, as is the cost of any available employer-sponsored coverage for the entire family. G The individual purchased insurance through the Marketplace during the initial enrollment period but had a coverage gap at the beginning of G The individual applied for CHIP coverage during the initial open enrollment period and was found eligible for CHIP based on that application but had a coverage gap at the beginning of G The individual is an American Indian, Alaska native, or a spouse or descendent of either who is eligible for services through an Indian health care provider. E The individual s gross income is below the filing threshold. The individual is experiencing circumstances that prevents him from obtaining coverage under a qualified health plan. The individual does not have access to affordable coverage based on his projected household income. The individual is ineligible for Medicaid solely because the state in which he lives does not participate in the Medicaid expansion under the Affordable Care Act. The individual has been notified that his health insurance policy will not be renewed and he considers the other plans available unaffordable. 1 Of Form 8965, Health Coverage Exemptions. No Code See Part II 1 No Code See Part I 1 No Code See Part I 1 No Code See Part I 1 No Code See Part I 1 Replacement Page 1/ Tax Year 1040 Quickfinder Handbook 3-13

10 Where to File 2014 Form 1040, 1040A, 1040EZ Due Date: April 15, 2015 At the date of publication, the IRS had not released the mailing addresses for Form 1040 series. When available, the filing addresses will be posted to the Updates section of our website: tax.thomsonreuters.com/quickfinder. Where to File Form 1040-ES for 2015 Due Dates: See Page 16-5 At the date of publication, the IRS had not released the mailing addresses for Form 1040-ES for When available, the filing addresses will be posted to the Updates section of our website: tax.thomsonreuters.com/quickfinder. Where to File Form 4868 for 2014 Return Due Date: April 15, 2015 At the date of publication, the IRS had not released the mailing addresses for Form When available, the filing addresses will be posted to the Updates section of our website: tax.thomsonreuters.com/quickfinder Tax Year 1040 Quickfinder Handbook End of Tab 3

11 ports the total IRA distribution on line 15a and the taxable amount (amount of distribution that was not an HFD) on line 15b. Enter HFD next to line 15b. Multiple exceptions. Attach a statement showing the amount for each exception instead of making an entry next to line 15b. Pensions and Annuities See also Tab 14 and Form 1099-R, Box 7 Distribution Codes on Page Fully taxable distributions. Distributions from pensions and annuities are fully taxable if: (1) the taxpayer did not contribute to the cost or (2) the taxpayer s entire cost was recovered before Leave line 16a blank and report the entire amount on line 16b. Partially taxable distributions. Enter the total distribution on line 16a and the taxable amount on line 16b. If Form 1099-R does not show the taxable amount use either the general rule or the simplified method to figure the taxable amount. See Qualified Annuities on Page to calculate the amount to enter on line 16b. Form 1099-R payments that should be reported on line 7: Disability pensions received before the minimum retirement age set by the taxpayer s employer. Corrective distributions of excess salary deferrals or excess contributions to retirement plans (not including IRAs). Lump-sum distributions. See Tab 14. Form RRB-1099-R. The amount in box 7 is generally fully taxable and reported on line 16b. However, if an amount is shown in box 3 (Employee Contributions) a portion of the benefits is nontaxable. See Qualified Annuities on Page for information about computing the taxable portion of benefits. Rollovers. Enter the total distribution (from Form 1099-R, box 1) on line 16a. From this total, subtract any after-tax contributions the taxpayer made and the amount of the qualified rollover. Enter the result, even if zero, on line 16b. Write Rollover next to line 16b. See Rollovers and Transfers on Page If rollover is to a Roth IRA or a designated Roth account, enter total distribution on line 16a. Subtract any after-tax contributions and enter the remaining amount on line 16b. Retired public safety officers. If a retired public safety officer elects to exclude from income distributions (up to $3,000) received from a governmental retirement plan that were used to pay for health and long-term care insurance premiums, report the total distribution on line 16a and the taxable amount on line 16b. Write PSO next to line 16b. (If pension is reported on line 7, include only the taxable amount on that line and enter PSO and the amount excluded in the space to the left of that line.) U Caution: This election is only available if the taxpayer retired because of disability or reached normal retirement age. The distribution must be from a plan maintained by the employer from which the taxpayer retired as a public safety officer and must be made directly from the plan to the insurance provider. Rental Real Estate, Royalties, Partnerships, S Corporations, Trusts, etc. See Tab 8. Farm Income See Schedule F Profit/Loss From Farming on Page Unemployment Compensation IRS Publication 525 Unemployment compensation is taxable [IRC 85(c)]. Total unemployment compensation is reported to the taxpayer on Form 1099-G. If an overpayment was received and repaid during the year, subtract the repayment amount from the total and enter the result on line 19. Write Repaid and the amount repaid on the dotted line. Repayments for prior years cannot be deducted from the benefits reported on line 19. See Repayments of Income on Page 5-17 for information on how to handle prior year repayments. Social Security Benefits IRS Publication 915 See the Social Security Benefits Worksheet (2014) on Page Calculate the taxable amount using the figure from box 5 of Form SSA-1099 or RRB (Form RRB-1099 reports railroad retirement benefits treated as Social Security benefits. Do not use the figures from Form RRB-1099-R.) Report the net benefits (from box 5 of Form SSA-1099 or Form RRB-1099) on line 20a and the taxable amount (or -0- if none are taxable) on line 20b. (Note: Amounts are reported on lines 20a and 20b, even if none of the benefits are taxable.) If the taxpayer is filing MFS and lived apart from his spouse for all of 2014, also enter D to the right of the word benefits on line 20a. Living apart means living in separate residences. Using separate bedrooms in the same residence is not living apart. [McAdams, 118 TC 373 (2002)] Repayments. All repayments made in 2014 are reported in box 4 of Form SSA-1099, including repayments for benefits received in prior years. Gross benefits are reduced by repayments, and the net amount is reported in box 5. Repayments are not reported on Form 1040 unless repayments shown in box 4 are more than gross benefits shown in box 3. If repayments exceed gross benefits, see Repayments of Income on Page 5-17 for how to deduct the excess. IRA deduction and Social Security computation. If the taxpayer (or spouse) is covered by an employer retirement plan, see IRA Deduction and Taxable Social Security on Page 14-6 for how to calculate the IRA deduction and taxable Social Security benefits. Social Security lump-sum election. Taxpayers must include the taxable part of a retroactive payment of benefits in current-year income even if the payment includes benefits for a prior year. There are two methods to calculate the taxable part of the total benefits received. 1) Regular Method. Use current-year income to figure the taxable part of the total benefits (including those from a prior year) received in the current year. 2) Lump-Sum Election Method: a) Refigure the taxable part of benefits for each prior year using that year s income, any benefits received during that year, and benefits received during the current year designated for that year. b) Subtract any taxable benefits for the refigured year that were previously reported. The remainder is the taxable part of the lump-sum payment. c) Refigure current-year taxable benefits without the lump-sum payment. d) Add all prior-year taxable benefits to current-year taxable benefits. Compare to taxable benefits calculated using the regular method and use the lower amount. Publication 915 contains worksheets for computing the taxable benefits using the lump-sum election method. To report benefits 2014 Tax Year 1040 Quickfinder Handbook 4-15

12 using the lump-sum election method, enter LSE on Form 1040 to the left of line 20a. Other Income Use line 21 to report any taxable income not reported elsewhere on the return. List the type and amount of income and, if necessary, include a statement showing the required information. Examples of income to report: Alaska Permanent Fund dividends. Child s income over $2,000 from Form 8814, Parents Election to Report Child s Interest and Dividends. Write 8814 in the space next to the line. See Reporting Child s Income on Parents Return on Page Income from the rental of personal property if the taxpayer was not in the business of renting such property. Report expenses on line 36 and write PPR next to the line. Income from an activity not engaged in for profit. See Business vs. Hobby Losses on Page Net operating loss carryover. (Subtract the NOL deduction from any income on line 21 and enter the result. If negative, enter in parenthesis. Enter NOL and the amount of the deduction, in parentheses, next to the line.) See Net Operating Loss (NOL) on Page Income and taxable reimbursements not included on any other line or schedule. Prizes and awards. Jury duty pay. Gambling winnings. (Winnings over certain thresholds generally reported to taxpayer on Form W-2G.) Taxable distributions from qualified tuition programs (QTPs) or Coverdell education savings accounts (ESAs). Taxable amount may be subject to 10% penalty, reported on Form See Education Savings Accounts on Page 13-7 and Qualified Tuition Programs on Page Taxable distributions from medical savings accounts (MSAs). Enter MSA ( Med MSA if distribution from a Medicare Advantage MSA) next to the line. Taxable distributions may also be subject to a 20% penalty tax (50% for Medicare Advantage MSA). See Form Deemed income from an HSA because the individual did not remain HSA-eligible during the testing period. See Recapture on Page Taxable per diem or periodic payments under a long-term care insurance contract from Form Enter LTC next to line. Reemployment trade adjustment assistance (RTAA) payments (Form 1099-G, box 5). Loss on certain corrective distributions of excess elective deferrals to employer retirement plans. A loss is reported as a negative amount and identified as Loss on Excess Deferral Distribution. Dividends on insurance policies if they exceed the total of all net premiums paid for the contract. Taxable cancellation of debt income (non-business debts). See Canceled Debt on Page 4-3. Recapture of charitable contribution deductions related to donations of fractional interests in personal property or to property donations when the charity disposes of the property within three years. Taxable part of disaster relief payments. Taxable health savings account (HSA) distributions. Distributions not used for qualified medical expenses of the account beneficiary, spouse, or dependents are included in gross income and subject to a 20% penalty. Exceptions to the penalty include distributions after the beneficiary s death, disability or attainment of age 65. (Qualified medical expenses are generally the same as for itemized medical expenses. See Tab 5. Exception: Insurance premiums normally are not treated as a qualified medical expense for HSAs.) All HSA distributions are reported on Form 8889, Health Savings Accounts (HSAs), where the taxable amount and 20% penalty, if any, are computed and carried to lines 21 and 62 of Form 1040, respectively. If an amount carries to line 21 or 62, enter HSA on the dotted line next to the amount. Adjustments to Income Reserved (for Educators Expenses) Line 23 is reserved. See Educators on Page 9-7. Business Expenses for Certain Employees See Above-the-Line Deduction for Certain Employees on Page 9-7. Health Savings Account Deduction IRS Publication 969 A health savings account (HSA) is a savings account set up exclusively for paying the qualified medical expenses of the account beneficiary or the beneficiary s spouse or dependents. (IRC 223) Eligible individuals. To qualify for an HSA, an individual: Must be covered under a high deductible health plan (HDHP). May not be covered under any non-hdhp health plan. Cannot be enrolled in Medicare. Cannot be eligible to be claimed as a dependent on another person s return. Employees. The employee, the employer or both may contribute to the HSA. Contributions made by the employee are deductible. Contributions made by the employer (including contributions made through a cafeteria plan) are excluded from employee s income and are not subject to employment taxes. S corporation shareholders. More than 2% shareholders are not eligible for pre-tax HSA contributions by their employer. Employer contributions to a more-than-2% shareholder s HSA are generally treated as compensation and then deducted by the shareholder. (Notice ) Self-employed or unemployed. The eligible individual may contribute to the HSA or any person (such as a family member) may contribute to an HSA on behalf of an eligible individual. Contributions made by the individual (or by any other person) are deductible in computing the individual s AGI. A self-employed individual s own HSA contributions are not taken into account in determining SE tax HSA Contribution Limits 1 Type of Coverage Under Age 55 Additional Contribution Age 55 or Older at Year-End Self-Only $3,300 $1,000 Family 6, ,000 1 Contribution limit reduced by: Amounts contributed to an MSA. Employer contributions to the HSA that were excluded from income. Transfers from the individual s IRA to the HSA. See Health savings account (HSA) funding distribution (HFD) on Page Divided between spouses if either spouse has family coverage Tax Year 1040 Quickfinder Handbook Replacement Page 1/2015

13 Alimony Paid See also Alimony on Page Enter alimony paid on line 31a. Include the recipient s Social Security number on line 31b. If the taxpayer made alimony payments to more than one person, enter one SSN on line 31b and attach a statement listing the numbers of the other alimony recipients. IRA Deduction See also Traditional IRAs on Page IRA contributions must be made by April 15, 2015 no extensions. Report: Deductible IRA contributions for the taxpayer and spouse on line 32. Nondeductible contributions to a traditional IRA on Form conversion contributions to a Roth IRA on Form See Roth IRA Conversions on Page Student Loan Interest Deduction See Student Loan Interest Deduction on Page Reserved (for Tuition and Fees Deduction) Line 34 is reserved. See Tuition and Fees Deduction on Page Domestic Production Activities Deduction See Domestic Producer Deduction (DPD) on Page Total Adjustments Add lines 23 through 35 and enter the total on line 36. Include the following adjustments in the total on line 36, and enter the amount and description to the left of line 36: Adjustments Included in Line 36 Archer MSA deductions (see Archer MSA deduction below). Attorneys fees paid in connection with a taxable IRS whistleblower s award. Attorneys fees for settlements in connection with unlawful discrimination, but only to the extent of the amount included in income. Contributions by certain chaplains to Section 403(b) plans. Contributions to Section 501(c)(18)(D) pension plans. This amount should be identified with Code H in box 12 of Form W-2. Expenses from the rental of personal property if the income from the rental of personal property was reported on line 21. Forestation or reforestation amortization if the taxpayer could claim a deduction for these costs and did not have to file Schedule C, C-EZ or F. Jury pay given to employer because employer continued to pay salary while on jury duty. (Also reported as income on line 21.) Repayment of supplemental unemployment benefits under the Trade Act of Alternatively, the taxpayer may be able to claim a credit against tax. (IRS Pub. 525) Replacement Page 1/2015 Describe on Return as MSA WBF UDC 403(b) 501(c)(18)(D) PPR RFST Jury Pay Sub-Pay TRA Archer MSA deduction. A medical savings account (MSA) is a trust established to pay for qualified medical expenses of the account holder. A participant must: 1) Work for a small employer or be self-employed and 2) Have a high-deductible health plan (HDHP). (IRC 220) 2014 MSA High-Deductible Health Plan Individual Coverage Family Coverage Annual plan Minimum $2,200 $4,350 deductibles Maximum 3,250 6,550 Out-of-pocket expense limit 4,350 8,000 Maximum annual contribution 65% of deductible 75% of deductible Contributions are limited to net self-employment (SE) earnings or employee compensation from the business establishing the HDHP, and may be made by an employer, an employee or a self-employed individual contributions must be made on or before April 15, Taxpayers receive Form 5498-SA, which shows the amount contributed during the year. Report all contributions on Form Include the deductible amount in the total on line 36 of Form 1040 and write MSA to the left. Excess contributions are subject to a 6% penalty (calculated on Form 5329) unless the excess plus allocable income is distributed by the filing due date, including extensions. Adjusted Gross Income If line 37 is less than zero, the taxpayer may have an NOL [see Net Operating Loss (NOL) on Page 6-14] that can be carried to another year. See the NOL worksheets in Tab 3 and IRS Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Taxes and Credits Age 65 or Older and Blind Check all applicable boxes on line 39a for the taxpayer and spouse. Age. For 2014, a taxpayer born before January 2, 1950 is considered age 65 or older. Blindness: If the taxpayer or spouse is completely blind as of December 31, 2014, attach a statement describing the condition. If only partially blind, attach a copy of a statement certified by an eye doctor or optometrist that sight is not better than 20/200 in the better eye with glasses or contact lenses or the field of vision is 20 degrees or less. If a statement filed in a prior year certified that the condition was unlikely to improve, a new certified statement from the doctor or optometrist is not required. The taxpayer must keep the statement for his records. MFS and Spouse Itemizes Deductions or Dual-Status Alien Check the box on line 39b if the taxpayer is MFS and his spouse itemizes deductions on a separate return (either MFS or HOH), or if the taxpayer is a dual-status alien. Exception: If the dual-status alien and his spouse who is a U.S. citizen file a joint return and both agree to be taxed on their combined worldwide income, do not check the box. Note: Married taxpayers filing as HOH do not need to check this box, even if their spouse itemizes deductions. (CCA ) If the box on line 39b is checked, the standard deduction is zero. Itemized/Standard Deduction See Tab 5. Enter the larger of itemized deductions or the standard deduction on line 40. If the box on line 39b is checked, the standard deduction is zero, even if the taxpayer is age 65 or older or blind. Standard deductions are listed in the Quick Facts Data Sheet on Page 3-1. A taxpayer who elects to itemize deductions even though they are less than the standard deduction should complete Schedule A and check the box on line 30 of that Strategy: It may be advantageous to itemize deductions even though less than the standard deduction when the taxpayer is subject to AMT because the standard deduction is added back for AMT purposes. Also, there may be instances when the tax benefit of being able to itemize deductions on the taxpayer s state tax 2014 Tax Year 1040 Quickfinder Handbook 4-19