Taxes (MP) Before you know it, April 15, 2016 will be here, and it’ll be nearly time for the annual deluge of tax forms – including 1098’s reporting mortgage interest or W-2’s from employers reporting your annual wages. Getting a heads up on Tax Deduction items for 2015 can maybe save you a pile of money. It’ll certainly allow you to gather documents for the past year’s taxes and adjust your budget to account for changes in the tax code that took effect on New Years Day, 2015.
These new Internal Revenue Service changes has some tax deductions increasing and others decreasing. Your best strategy is to plan ahead based on what you think you will owe the IRS, and be proactive on your withholding and savings strategies. After all, you don’t want the new tax code reducing your retirement contributions.
The Big Tax Deduction Changes in 2015
The tax deduction items for tax year 2015 of greatest interest to most taxpayers include:
Tax Rate Changes!
The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax deduction thresholds are described in the revenue procedure.
The standard write off rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
Itemized Tax Deductions!
The limitation for itemized deductions to be claimed on year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
Earned Income Credit!
The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, and income thresholds and phase-outs.
Exemptions for 2015!
The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
Estates of descendents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of descendents who died in 2014.
For 2015, the exclusion from levy on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
Exclusion Gift Taxes!
For those who qualify for the annual exclusion for gifts there will be no change. It remains at $14,000 for 2015.
Foreign Earned Income Levies!
For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
Employee Contributions to Healthcare!
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) increases to $2,550, up $50 dollars from the amount for 2014.
Small Business Healthcare Tax!
Under the small business health care tax credit, the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,800 for year 2015, up from $25,400 for 2014.
The Alternative Minimum Tax!
The exemption amount for year 2015 is $53,600 ($83,400, for married couples filing jointly). That’s up slightly, about 1.5% from 2014. The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly). The so-called “alternative minimum tax” was a headache for many middle-class Americans. Since certain breaks can greatly cut your bill, the IRS created the AMT to set a limit on those benefits – and to place a minimum tax burden on you.
The limit on employee contributions to a 401(k) plan will increase to $18,000, up $500 from 2014’s cap. That means you tell your payroll department to adjust up your contribution starting on the first of the year to make sure you save the maximum allowable in 2015.
The IRS will also limit nontaxable IRA rollovers to one every 12 months regardless of how many individual retirement accounts you have. In the past, people with multiple IRAs would take advantage of a provision allowing them to withdraw money, and put it back within 60 days without the levy hit of an early distribution. By rolling money from one IRA to another, they could essentially give themselves a short-term loan because the money was held in separate accounts.
Health Insurance Penalty!
Part of the Affordable Care Act mandates that all Americans have health insurance, or pay a tax penalty as a result. In 2014, the penalties are 1% of your household income or $95 per person – whichever is greater. But in 2015, those penalties ramp up significantly to 2% of total household income, or $325 per person.
For the new year starting in January, income tax thresholds have again been adjusted up for inflation. The highest rate of 39.6%, for instance, will now apply to single filers who make over $413,200 and married couples making $464,850. Both figures are up about 1.6% from tax year 2014. For more information on specific income brackets see Tax Bracket and Tax Due Charts for 2015 by Kelly Phillips over at Forbes.