Significant tax law changes take effect in tax year 2014 for individuals and businesses alike. The most noteworthy changes include:
Individual health coverage mandate: The Affordable Care Act mandates that most individuals have health insurance coverage in place by 2014. Nonexempt individuals who do not maintain required health coverage for themselves and any nonexempt dependents are subject to a penalty. Individuals who are liable for the penalty must pay it when they file their 2014 return. The penalty for noncompliance is relatively small in 2014 but increases substantially in 2015.
Look for the following forms which you will need to complete your tax return:
Form 1095-A: Taxpayers who enrolled in coverage through an exchange will receive this form in January 2015 which will report the premiums paid, the benchmark premium and any premium advance.
Form 1095-B: Taxpayers who have health insurance coverage either purchased by a small employer (less than 50 full-time employees) or individually (but not purchased through the exchange) will receive this form which will show the individuals covered and the dates of coverage.
Form 1095-C: Taxpayers who have health insurance coverage through a large employer (50 or more full-time employees) will receive this form which will list the individuals covered and the dates of coverage as well as additional information necessary to calculate any penalty.
Depreciation: One of the biggest changes for the 2014 tax year for many businesses and individuals with rentals will be implementing the new repair versus capitalization rules. The new rules are too complicated to get into here, but be aware that the definition of what must be depreciated has changed. If you own rental properties or have any fixed assets in your business I suggest you speak with a competent professional about the new regulations.
The $27,500 cap on itemized deductions will no longer apply to medical and dental expenses included in an individual’s federal itemized deductions. This is especially good news for those with significant long-term care expenses.
The maximum income tax subtraction modification for certain retirement benefits is increased from $6,000 to $10,000. The modification is expanded to include all federally taxable pension income, annuity income and individual retirement account distributions, excluding Maine Public Employees Retirement System pick-up contributions for which a deduction is allowed.
The Maine Property Tax Fairness Credit is increased to a maximum of $600 ($900 for filers at least 65 years old) up from $300 last year ($400 for filers at least 65). The calculation method, however, is now also changed so it is too early to tell if this is a good or bad thing for most people.