Personal Income Tax
Mary B Pearson, CPA
Assistant Professor of Accounting
Topics Discussed:
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New Income Tax Legislation
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Income Tax Brackets
Dependent Qualifications
Capital Gain Rates
Child Tax Credit
Child & Dependent Care Credit
Medical Expense Deduction
Common Questions
 Q&A
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Too Simple?!
2014 Tax Brackets
Tax Rate
Single
Married Filing Joint
10%
$0 - $9,075
$0 - $18,150
15%
$9,075 – $36,900
$18,150 - $73,800
25%
$36,900 – $89,350
$73,800 - $148,850
28%
$89,350 – $186,350
$148,850 - $226,850
33%
$186,350 - $405,100
$226,850 – $405,100
35%
$405,100 - $406,750
$405,100 - $457,600
39.6%
Over $406,750
Over $457,600
Dependent Qualifications
Can Claim: Son, Daughter, Step Child,
brother, sister, step brother, step sister,
grandchild, or descendent.
 If over 19, did the person earn less than
3,950?
 Can claim child under 19 or under 24 and
a full time student
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◦ Did you pay over ½ support?
◦ Did the dependent live with you over half the
year (exception = divorce, education)?
Capital Gains Tax Rates
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Capital Gains tax is imposed on sale of
investment assets (stocks, land, rental
property) where the sales price exceeds
your basis. Still favorable tax treatment
on sale of personal residences!
◦ In 2014, the new capital gains tax rate caps at
20% for tax payers in the 39.6% income tax
bracket and above.
◦ If you are in the 10% -15% tax bracket, the capital
gains rate is still 0%, 25%-35% tax bracket, the
capital gains rate is 15%.
Child Tax Credit
$1,000 credit (can be refundable credit)
 Eligible for a dependent child under the
age of 17
 Credit is reduced by $50 for every
$1,000 dollars over $110,000 MFJ,
Adjusted Gross Income ($75,000 Single)
 Phases out completely at $130,000 MFJ,
and $95,000 Single
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Child Care Credit
Qualifying Person must be under the age
of 13 and a dependent.
 Credit is 20% of amount paid for child
care up to $1,050 for one child, and
$2,100 for two or more children.
 Credit cannot exceed one spouses
earned income.
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Medical Expense Deduction
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Take Advantage of Health Savings
Accounts (HSA)
◦ Tax Free Contributions
◦ Limits = $3,300 Single, $6,550 Family, if 55 or
older, can contribute another $1,000
◦ New threshold for medical and dental
deduction is 10% for taxpayers under 65
makes it harder to deduct expenses as an
itemized deduction.
Estate and Gift Tax Amounts
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2014 Estate limit is $5.00 million
◦ To decrease taxable estate an individual can
gift up to $14,000 per person per year, tax
free and not included in receivers income
◦ For a couple, they can gift $28,000 to a child,
grandchild, sister, brother… per year
What am I???
Can I file HEAD OF HOUSEHOLD?
You are unmarried or considered
unmarried at the end of the year.
 You paid more than one half the cost of
keeping up a home for the year.
 A “Qualifying Person” lived with you in
the home for more than half the year.
Exception: school absences, dependent
parent
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What is Self Employed Income?
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Revenue: What did I make?
Deductions:
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Advertising
Car & Truck Expenses/Mileage = $.565 per mile
Contract Labor
Repairs
Licenses
Bank Fees
Expense or Depreciate Business Assets
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Computers/Desks/Equipment/Software
Insurances
Interest paid on Credit Cards
Legal and Professional Fees including tax prep fees and advice
Office Expenses
Rental costs for equipment & property, including storage shed fees
Travel Costs including meals and lodging
Supplies
Cell Phone & Internet Costs
Business Use of Home
Education Credits
American Opportunity Credit= First 4
years of Post Secondary Education = Up
to $2,500 (100% of 1st $2,000, 25% of
next $2,000) 40% is refundable
 Lifetime Learning Credit = All Post
Secondary = $2,000 per taxpayer (20% of
expense)
 Tuition and Fees Deduction = $4,000 per
year
 All phase out at a maximum of $180,000
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Can I deduct Student Loan Interest?
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Student Loan Interest: Can deduct up
to $2500 if AGI is less than $75,000
Single, $150,000 MGJ
Can I contribute to a Roth IRA?
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Roth IRA: Non Deductible, but earns
interest tax free. Withdrawals are nontaxable
◦ Can contribute up to $5500 if under 50 and
$6500 if over 50 and:
◦ AGI is less than $191,000 MFJ
◦ AGI is less than $129,000 Single
What are the 2014 Standard
Deductions and Exemption?
Single: $6,200
 Married Filing Joint: $12,400
 Head of Household: $9,100
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Exemption Amount = $3,950
What are Itemized Deductions?
Medical and Dental Expenses
 Personal Property Taxes on vehicles are
not deductible in Utah
 Sales Tax vs. State Income Taxes
 Real Estate Taxes
 Mortgage Interest
 Principle Mortgage Insurance Premiums
 Charitable Contributions
 Unreimbursed Employee Expenses
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Do I Qualify for Earned Income
Credit?
Maximum
Income MFJ
Maximum
Income Hof H
# Children
$ Credit
$51,567
$46,227
3
$6,044
$48,378
$43,038
2
$5,372
$43,210
$37,870
1
$3,250
$19,680
$14,340
0
$487
What Education Expenses can I
deduct?
Item
Education
Amount
Covered
Expenses
Income
Phase Out
American
Opportunity
Credit
4 years of
Post
Secondary
Education
$2,500 per yr
& student
40% of credit
is refundable
Tuition, Fees,
Books, and
Supplies
$180,000 MFJ
$90,000
Single
Lifetime
Learning
Credit
Post
Secondary
$2,000 per
taxpayer
20% of
expenses
Tuition, Fees,
Books, and
Supplies
$122,000 MFJ
$61,000
Single
Tuition &
Fees
Deduction
Post
Secondary
$4,000 per
year
Qualified
Tuition &
Fees
$160,000 MFJ
$80,000
Single/Hof H
Can I withdraw my 401K early?
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Yes, but you will pay a penalty of 10% if
not used for:
◦ Unreimbursed medical expenses or medical
insurance premiums if over 10% of your AGI
◦ Total or Permanent Disability
◦ Higher Education Expenses
◦ Purchase of your first home
◦ IRS levy
◦ Qualified Reservist Distribution
Questions & Answers
Personal Income Taxes are due
Thursday, April 15th, 2015
 Filing Period: Three years from the due
date of the return to claim a refund.
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◦ EX: Due date April 15, 2014. You have until
April 15, 2017 to file or amend a 2013 return
for a refund.