At the beginning of a new year, tax laws change. They affect everyone with a taxable income. New tax exemptions have been made that everyone needs to be aware of. Take a look at some of these very important tax laws that you need to either keep in mind or take advantage of.
Here is something that will not affect your 2014 tax return, but will affect your savings. After Jan. 1, 2015, you will only be able to rollover your IRA funds into another IRA once in a yearlong period. This means that you can still do multiple trustee-to-trustee transfers over a year. If you do several IRA rollovers, you will be taxed your regular rates and you do risk a 10 percent early withdrawal tax. Just be careful about how you withdraw your IRA funds.
For tax purposes, the definition of foster care means more than simply temporarily caring for a child that it unrelated to you. If you are caring for someone in your home that is physically, mentally or emotionally disabled, you may be receiving payments from Medicaid. These payments will not be considered part of your taxable income, even if the person that you are caring for is a relative.
When you are unemployed, it can be difficult to make ends meet. Many job seekers need to rely on unemployment benefits to help keep their family afloat in-between jobs. In the upcoming year, these will be considered taxable income. The U.S. Supreme court also ruled that any supplemental unemployment payments such as severance packages will be considered taxable wages and so the government will also withhold any social security taxes.
Affordable Care Act
If you have been receiving health care under the Affordable Care Act, you will be subject to paying the individual mandate and any premiums for your insurance. If you currently do not have health care and you have not signed up for insurance under the Affordable Care Act you will be subject to a tax penalty. You may be exempt under specific circumstances, but it is only if your income is too low to pay your premium.
Pell Grants can now be allocated to living expenses for students, however this means that the Pell grants are now subject to the same tax law as the income for their living expenses. Even if you are using the Pell Grant to pay for your education, which is the most common purpose of the Pell Grant, it will still be taxed as a form of income.
Tax laws can be confusing and it is often better to have a professional to do your tax preparation. However, just being aware of the changes that are happening in the upcoming year can make big differences. If you have questions, talk to a tax professional to see where you will need to be considering paying taxes and where you could be receiving tax deductions. Understanding your taxes can help you avoid IRS audits and other tax issues.