TurboTax / Tax Calculators & Tips / All Tax Guides / General Tax Tips / Inflation-Related Tax Law Changes for 2014

Inflation-Related Tax Law Changes for 2014

Updated for Tax Year 2014


Many taxpayers will benefit from inflation-based adjustments to various deductions, exemptions, credits and thresholds for the 2014 tax year. A number of changes went into effect. The net effect is essentially a tax cut for the taxpayers who are affected.

For the 2014 tax year, many taxpayers will benefit from inflation-based adjustments to various deductions, exemptions, credits and thresholds. By law, the Internal Revenue Service must make these adjustments based on the inflation rate. While not every amount is changed every year, there are always some adjustments. A number of changes went into effect in 2014. The net effect is essentially a tax cut for the taxpayers who are affected.

Deductions and exemptions

Most taxpayers enjoy an exemption for themselves and any dependents. For 2014, this exemption rises to $3,950, $50 more than 2013. For the bulk of taxpayers, who don't itemize deductions, the standard deduction rises to $12,400 for joint filers, $9,100 for heads of household and $6,200 for single filers and married taxpayers filing separately. Taxpayers using the foreign earned income exclusion will see a rise to $99,200, up $1,600 from 2013.

Credits and phase-outs

The earned income tax credit (EITC) is an important tax benefit for low- and middle-income taxpayers, particularly those with dependent children. For 2014, the maximum credit rises from $6,044 to $6,143. For purposes of qualifying for the EITC, the maximum income rises to $52,427, up from the 2013 maximum of $51,567.

The phase-out of the lifetime learning credit begins at a modified adjusted gross income of $108,000 for joint filers, a rise from 2013's $107,000 limit. For singles and heads of household, the limit goes from $53,000 to $54,000.

Phase-out limits for the deduction on student loan interest are unchanged for 2014 with the deduction phasing out from $60,000 to $75,000 for individual taxpayers and from $125,000 to $155,000 for joint filers.

Tax bracket thresholds

All tax brackets except the highest benefit from a widening in 2014, thanks to the IRS inflation adjustments. The 39.6 percent tax bracket is the highest bracket in addition to the 10 percent, 15 percent, 25 percent, 28 percent, 33 percent and 35 percent brackets.

Estate and gift taxes

Wealthy taxpayers see a rise in the amount that can be left to heirs without paying estate tax for 2014, up to $5.36 million from $5.25 million in 2013. However, the annual gift tax exclusion remains at $14,000.

A 2014 inflation adjustment comes into play for estate executors choosing the special use valuation for qualified real property. Essentially, the special use valuation allows an executor to assign a property a lower value -- and consequently a lower estate tax liability -- if its "special use" lowers its value below what would otherwise be fair market value. For 2014, executors can lower the value of property in this manner by up to $1.09 million, up $20,000 from 2014.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or efile and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal efile of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $34.99 Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • Benefit Assist: After you file, TurboTax automatically shows you a full list of government benefits you may qualify for, like Food Stamps or reduced phone & utilities. Plus, we help you apply, saving you time and making it easier than ever to get more money! Estimate based on calculation of Benefit Assist users from tax year 2013 and published reports of average benefit and savings amounts from federal and state programs. Benefit Assist users who received one or more federal or state benefits received on average $576 (based on survey March-June 2015). Actual amounts and qualifications based on your individual situation; some individuals will not qualify. Feature may not be available for all customers.