Obamacare Tax Penalty

Line 61 on the 2014 income tax return is where the penalty ends up on your return. It is called the individual shared provision and you owe it if you do not have health insurance coverage for all 12 months of 2014. The maximum penalty is based on the bronze level health plan which is $2,448 per individual. The penalty is the greater of a family maximum of $285 or 1% of your household income above the tax return filing threshold for your filing status. I think most people will pay at the 1% of household income figure. For example, a married couple with 2 children and $70,000 of adjusted gross income would pay a penalty of $497 for 2014. The calculation would be as follows: $70,000 minus the filing threshold of  $20,300 equals $49,700. One percent of $49,700 is $497 which is greater than the flat amount of $285 but under the cap of $2,448 x 4 or $9,792.  The penalty doubles to 2% in 2015.

Transferring Wealth

If you have an estate significantly over $5,340,000, you should consider gifting assets and paying the gift tax of 40%. The assets, the 40% tax, and any future asset appreciation are removed from your estate. This would be more beneficial than leaving the assets in your estate to be taxed at death since the effective estate tax rate would be 40% vs 28.57%(40/140) with a taxable gift since the gift tax is deductible from the estate. Greater after tax family wealth can be transferred using gifts as long as you can survive for 3 years after the gift. The IRS recognizes this benefit to gifting and so to discourage death bed transfers all gift taxes paid within 3 years of death have to be added back to the taxable estate.

Cash Charitable Contributions of $250 or More

If you give $250 or more to any charity at one time, you should be given an acknowledgement letter from that charity documenting your donation and whether the charity provided you any goods or services in exchange for your contribution. These acknowledgement letters should be kept in a file and given to your tax preparer each year. Otherwise you may lose the deduction in case of an IRS audit even if you have a copy of the check to the charity. Charities are required to provide these letters, so if you have lost one make sure you ask for another copy.