CHICAGO (Nov. 18, 2014) – The ever-changing tax law landscape makes it essential to review taxpayers’ situations and plan for their 2014 tax liability. To help determine the best strategies available to minimize tax obligations, Crowe Horwath LLP, one of the largest public accounting and consulting firms in the U.S., has issued, “Tax Planning: 2014 Year-End Guide.”
“Following this year’s elections, we now have a Republican-controlled House and Senate, but a Democrat-controlled White House, so it’s likely we’ll again see last-minute temporary extensions instead of a permanent fix to many of the major tax breaks that expired last year,” said Gary Fox, managing partner of Crowe Tax Services. “During the next two years, there likely will be much discussion about tax reform, including the Affordable Care Act (ACA), excise taxes and top-tax rates, but it might be hard for Congress to enact any substantial changes ahead of the next presidential election without enough votes to override a presidential veto.”
For individual taxpayers, Fox noted that it’s important to understand the potential tax consequences of buying, holding and selling an investment, particularly for high-income earners. High-income taxpayers are subject to the ACA’s net investment income tax (NIIT), which starting in 2013 makes taxpayers with income of more than $200,000 per year ($250,000 for married filing jointly) subject to an extra 3.8 percent tax on the lesser of their net investment income or the amount by which their modified adjusted gross income exceeds the applicable threshold. According to Fox, because the NIIT is triggered based on adjusted gross income (AGI), strategies to reduce AGI – such as making deductible retirement contributions –also could reduce NIIT liability.
“Many high-earners were surprised to find that when they filed their 2013 taxes their income was subject to the new NIIT. This year, they’re looking to avoid or minimize those fees by implementing strategies such as using unrealized losses to absorb gains,” said Fox.
Fox added that high-income taxpayers also should be aware of a new “phantom tax,” which disallows deductions and results in their taxes increasing even though their tax rates are unchanged. Beginning in 2014, married taxpayers with AGI in excess of $305,050 and single taxpayers with AGI in excess of $254,200 will see a reduction in their otherwise allowable itemized deductions. The reduction applies to all itemized deductions other than medical expenses, investment interest, or casualty, theft or wagering losses.
The “Tax Planning: 2014 Year-End Guide” includes information on income and deductions; family and education; investing; business; retirement; estate planning; and tax rates. To download the guide, please visit: www.crowehorwath.com/yearend-NR.
About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe and its subsidiaries have offices coast to coast with more than 3,000 personnel. The firm is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.