(BPT) – Most tax law changes don’t affect the average taxpayer. That’s fortunate news, considering the U.S. averaged at least one tax law change per day every day between 2000 and 2012.
Some tax changes generally happen every year, such as inflation adjustments to standard deduction and exemption amounts. Others happen every few years, like expiration or renewal of credits and deductions, new taxes and tax increases.
What can you do to ensure you maximize the benefit or minimize the negative impact of tax law changes each year? It’s quite simple, says TaxACT spokesperson Jessi Dolmage.
“Do a dry run of your federal income tax return each fall,” Dolmage recommends. “DIY tax programs are updated with the latest tax laws every fall so you can get an estimate of your refund or liability as it currently stands. The Q&A also reviews credits and deductions you can still take advantage of in the next few months.”
You can do tax planning and calculate your 2014 taxes with a DIY tax return preparation solution (most are free to try) or with a tax calculator like TaxACT’s at www.taxact.com/tax-calculator.
Whether you start your taxes early or wait until the April 15, 2015, deadline, here’s a list of key changes that could impact your 2014 tax return:
* Personal and dependent exemptions increase to $3,950 per person.
* The 2014 standard deduction is $6,200 for a single taxpayer and $9,100 for a head of household. The standard deduction for married couples filing jointly also increased to $12,400.
* Several benefits have expired, although Congress may extend them for 2014 returns. Those include the tuition and fees deduction, educator expense deduction, deduction for mortgage insurance premiums, cancellation of some mortgage debt, nonbusiness energy property credit, and state and local sales tax deduction.
* Did you purchase health insurance from the federal or a state-sponsored marketplace in 2014? If so, your marketplace will send Form 1095-A by Jan. 31. Simply enter the form information when your tax program asks for it.
If you qualified for the premium tax credit toward marketplace insurance, the information you need to report on your return will also be on Form 1095-A. Your credit amount, which was based on your best estimate of your household income at the time you applied for insurance, will be reconciled with your actual income reported on your tax return. If your income or household size changed since applying for insurance, so can your credit amount. You may receive a larger refund if your income was less than estimated, or you may have to pay some of the credit back if your income was more than estimated.
* If you didn’t have minimum essential health insurance for three or more months in 2014 and don’t qualify for an exemption, you may pay a shared responsibility payment. The penalty is the higher of 1 percent of your 2014 income or $95 per adult and $47.50 per uninsured dependent under 18, up to $285 per family. Your tax program will ask simple questions to calculate your payment.
If you qualify for an exemption, keep in mind some exemptions require you to submit an application and supporting documentation before filing your tax return. Only paper applications are being accepted by marketplaces, so processing can take weeks. Once accepted, your marketplace will issue an exemption certificate number (ECN) that you report on your tax return in order to avoid the penalty.