Welcome to Craft, Noble and Company's e-news update. Now that tax season and a
third of the fiscal year is over, here's the most current news. If you would prefer to
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Updates to Estate and Gift Taxes
Income tax, payroll tax, capital gains tax - frequent tax legislation changes the rules in many areas of the Internal Revenue Code,
including one you might not have focused on lately: estate and gift taxes. Here's what you need to know.
What's the current federal estate and gift tax exclusion? The exclusion is the amount you can transfer during your lifetime and
via your will before estate or gift tax is due. It consists of two items. The basic exclusion is $5 million, and is adjusted for
inflation annually. For 2014, the basic exclusion after inflation adjustments is $5,340,000.
The second part of the applicable exclusion benefits married couples. When you're married, your total exclusion can also
include the unused portion of your deceased spouse's basic exclusion. Executors make this "portability" election by filing an
estate tax return, even if an estate is not taxable and might not otherwise need to file.
Your personal basic exclusion plus the power to take advantage of portability means you and your spouse can transfer up to
$10,680,000 to your heirs, free of federal estate and gift tax.
Can you still make tax-free annual gifts? Yes. During 2014, you can give to as many individuals as you choose up to $14,000
each, gift-tax free. If you're married, you and your spouse can combine your individual $14,000 annual exclusions and give up to
$28,000 gift-tax free this year. As long as your gifts remain under the annual exclusion amount, they have no impact on your
$5,340,000 exclusion.
You can also make unlimited payments for unreimbursed medical expenses and tuition, gift-tax-free, when you pay the fees
directly to the medical care provider or qualified school. These payments are not considered gifts and do not reduce your
applicable exclusion, even if the people who benefit are unrelated to you.
Gifts between spouses are also excluded from gift tax, though an annual limit applies when your spouse is not a U.S. citizen.
If your total assets are less than $5,340,000, do you still need an estate plan? Yes, and here's why: Your estate plan
encompasses your will, beneficiary designations, asset titling, trusts, life insurance, powers of attorney, guardianship issues,
and end-of-life health care directives. These documents and decisions affect the settlement of your estate as well as the
financial interests of your heirs and should be reviewed with your attorney and accountant.
In addition, state tax law can vary from federal rules. An estate plan helps ensure that your family receives the maximum
benefit from available credits, deductions, exemptions, and exclusions. Take time to review your plan under the current rules.
Contact us for any assistance you need.
Phone: (859) 623-4027  Toll-free: (888) 298-4602  Fax: (859) 623-0443
IRS Lowers Mileage Rates for 2014
The IRS recently announced that the mileage rate for business driving in 2014 with be 56 cents per mile. A slight decrease from
the 2013 rate of 56.5 cents per mile. The mileage rates for medical and moving purposes also decreases from 24 cents per mile
in 2013, to 23.5 cents per mile for 2014. However, the mileage rate for charitable organizations stays the same at 14 cents per
mile.
Companies that don't want to keep track of the actual costs of using a vehicle for business purposes may use this standard
mileage rate instead. An annual study of the fixed and variable costs of operating an automobile is used to determine what the
standard mileage rate will be for a given year.
In addition to the mileage rate, a separate deduction may be claimed for parking fees, tolls, and interest relating to the
purchase of the automobile, as well as state and local personal property taxes.
The standard business mileage rate can't be used for automobiles used for hire (e.g., taxicabs) or for fleets of automobiles used
simultaneously by the taxpayer. Nor can the standard rate be used if the vehicle was previously depreciated by other than the
straight-line method, including using bonus depreciation or the Section 179 deduction.
When the business mileage rate is used in 2014, depreciation will be considered to have been allowed at a rate of 22¢ a mile.
This depreciation reduces the taxpayer's cost basis in the vehicle.
Retirement Contribution Limits Released for 2014
Each year, the IRS must make inflation adjustments to certain tax numbers, as required by tax law. The following are the 2014
retirement numbers that you need to know:
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IRA contribution limit for those under age 50 remains at $5,500. Those 50 or older can contribute up to $6,500.
401(k) salary deferral limit for those under age 50 remains at $17,500. Those 50 or older can defer up to $23,000.
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SIMPLE deferral limit for those under age 50 remains at $12,000. Those 50 or older can defer up to $14,500.
SEP annual contribution limit increases for 2014 to $52,000, up from $51,000 for 2013.
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Roth IRA eligibility phases out at the following income levels:
o For singles and head of household - $114,000 to $129,000
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o For married filing joint - $181,000 to $191,000
There is no income limit for rolling over a traditional IRA to a Roth IRA.
If the taxpayer has a company pension plan, IRA deductibility phases out at the following income levels:
o For singles and head of household - $60,000 to $70,000
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For married filing joint - $96,000 to $116,000
When taxpayer's spouse has a company pension plan - $181,000 to $191,000
If you have any questions regarding retirement contributions please call Craft, Noble & Company today.
Phone: (859) 623-4027  Toll-free: (888) 298-4602  Fax: (859) 623-0443
IRS Inflation Adjustments for 2014 Tax Numbers
Each year the IRS adjusts certain tax numbers for inflation and tax law changes. Here are some of the adjusted numbers you'll
need for your 2014 tax planning.
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Section 179 maximum first-year expensing deduction decreases to $25,000, with a phase-out threshold of $200,000.
Social security taxable wage limit increases to $117,000. Retirees under full retirement age can earn up to $15,480
without losing benefits.
Kiddie tax threshold remains at $2,000 and applies up to age 19 (up to age 24 for full-time students).
Nanny tax threshold increases to $1,900.
Health savings account (HSA) contribution limit increases to $3,300 for individuals and to $6,550 for families. An
additional $1,000 may be contributed by those 55 or older.
Estate tax top rate remains at 40%, and the exemption amount increases to $5,340,000.
The annual gift tax exclusion remains at $14,000.
Tax credit for adopting a child is $13,190 for 2014.
Alternative minimum tax exemption amounts increase to $52,800 for single taxpayers and $82,100 for married
couples filing a joint return.
Limit on transportation fringe benefit is $130 for vehicle/transit passes and $250 for qualified parking.
For assistance with your tax planning, contact our office. We're here to help you succeed.
Starting a Business? Don’t forget the tax man
Before you launch a new business, it's a good idea to prepare for an uninvited partner - the tax man. Knowing your tax
obligations in advance can save time, money, and even the life of your business. Here are a few tips:
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Open a separate checking account for your company, and don't mix your business and personal payments. IRS
auditors are trained to hunt for, and disallow, personal expenses claimed as business deductions.
Apply for an employer identification number (EIN). Even if you're a sole proprietor with no employees, you'll need an
EIN to start a self-employed retirement plan. Go to irs.gov and search "EIN online" to get a number.
Keep complete accounting records. Although no special system is required by the government, your records must
clearly reflect your income and expenses. Save business papers such as canceled checks, receipts, and invoices. You'll
need them if you're audited later on.
If you're a sole proprietor, partner, or owner of a limited liability company, you could owe substantial selfemployment tax. This tax should be included with your quarterly estimated income tax payments on Form 1040ES.
Depending on your location and type of business, you also could owe state and local taxes on income, gross receipts,
payroll, or business property.
With all these issues, it's wise to consult a professional before getting started. We at Craft, Noble & Company can advise you
about the specific tax requirements for your business, set up records that will pass government scrutiny, and continue to guide
you as your business grows. Your payoff will be more time to build your firm and peace of mind while you're doing it. Please
give us a call and let us help you succeed.
Phone: (859) 623-4027  Toll-free: (888) 298-4602  Fax: (859) 623-0443
Planning during Retirement
Planning during retirement can be just as important as planning for retirement. Payments from pension plans, social security
checks, withdrawals from 401(k)s, income from a part-time job - these become your paychecks. Planning during retirement
helps ensure that you remain financially independent.
Two of the biggest financial decisions you're likely to face during retirement are when to start tapping retirement savings and
how much to take out. Many people take out too much too soon. It's tempting to look at your 401(k) balance and to start
dreaming about those exotic vacations you've always wanted to take or that fancy new car you've always wanted to drive. Slow
down. You may be retired for the next thirty years.
That's why it's a good idea to set up a retirement budget. Based on your life expectancy, consider how much you'll need to
cover expenses. Will you travel? Will you help a child or grandchild buy a house or pay for college expenses? Also, determine
how much you've accumulated and how much that money will grow. A retirement budget can help ensure that you have
enough money for the necessities - and for the luxuries.
When should you start taking money out of retirement savings? A good general rule is to withdraw retirement savings only
when other sources of income aren't enough. If you can wait until age 70½ before taking money out of 401(k) plans and other
tax-sheltered accounts, do so. The longer your money stays in such accounts, the longer you'll enjoy tax-deferred growth.
Whether you're about to retire or have been retired for a while, we can help you consider the implications, including the tax
impact, of a withdrawal plan. Give us a call at Craft, Noble & Company.
Phone: (859) 623-4027  Toll-free: (888) 298-4602  Fax: (859) 623-0443