The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments and your livelihood.

Availability of tax credit for health insurance purchased on the federal exchange.
A credit is available for qualifying individuals who purchase health insurance on an exchange. The credit is payable in advance if the taxpayer chooses. Income affects the amount of the credit, so the taxpayer must go through a special computation when he files his return to see if he received too much or too little of the credit.

Exemptions from penalty for not having health coverage.
Beginning in 2014, individuals and their family members must have qualified minimum essential health insurance coverage, make a shared responsibility payment when filing their federal income tax return, or qualify for an exemption. A taxpayer obtains an exemption from either the Health Insurance Marketplace or the IRS, depending on the type. All exemptions are reported on the tax return, although a taxpayer is automatically exempt if he doesn’t have to file a return because his income is below the filing threshold for his status.

The exemptions and where an exemption may be obtained are as follows:

  • Members of certain religious sects (Marketplace)
  • Short coverage gap (IRS)
  • Certain non-citizens (IRS)
  • Coverage is considered unaffordable (IRS)
  • Household income below the return filing threshold (IRS)
  • Members of federally-recognized Indian tribes (Either)
  • Members of health care sharing ministries (Either)
  • Incarceration (Either)
  • Hardships (Either)

Favorable result for taxpayer who sold home after converting it to rental property.
A married couple filing jointly can exclude up to $500,000 of gain on the sale of their residence. Losses from rentals and other activities generally can’t offset passive income, but such losses can be used when the taxpayer disposes of his entire interest in the activity. This was good for the taxpayers because it meant that they could use the loss to offset other income.

Simplified per-diem increase for post-Sept. 30, 2014 travel.
An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual expenses. If the rate paid doesn’t exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn’t subject to income or payroll-tax withholding and isn’t reported on the employee’s W-2.

Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable 417-881-0145.