By Sarah Foster
The Social Security Administration, the Center for Medicare and Medicaid Services and the Internal Revenue Service have announced cost of living increases for 2014. Monthly Social Security and Supplemental Security Income (SSI) benefits will increase 1.5 percent in 2014.
The maximum amount of earnings subject to Social Security tax will increase from $113,700 to $117,000. Of the estimated 165 million workers who pay Social Security taxes in 2014, about 10 million will pay higher taxes as a result.
Medicare Part B premium and deductible will stay the same in 2014. The Part A hospital inpatient deductible increases from $1,184 for each benefit period to $1,216 in 2014. There will also be changes to the prescription drug “donut hole” in 2014 (the gap in coverage when Medicare beneficiaries have to pay a greater portion of their drug costs). Starting in 2014, the initial coverage limit will start at $2,850 (down $120 from last year) meaning more people will end up in the coverage gap sooner.
The Internal Revenue Service also recently announced their inflation adjustments for the 2014 tax year (note that these changes will not affect returns filed in 2014, but rather the returns filed in 2015 for the 2014 tax year). The basic standard deduction increases to $6,200 for singles and $12,400 for married couples (up from $6,100 and $12,200, respectively).
The personal exemption amount increases to $3,950 (from $3,900) but is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples).
The estate tax exemption will increase to $5,340,000, up from $5,250,00 this year, but the annual gift tax exclusion will remain unchanged at $14,000.
