Living a financially prosperous life is partly a result of managing your expenses in relation to your income while spending on things you enjoy that add value to your life. Another important aspect of a sound financial plan is saving a portion of your income for short, mid and long term savings, and investments which includes retirement.
What I believe to be another significant element in improving your finances is to continually seek knowledge and apply what you learn in order to help you keep more money in your account or at least pay less taxes. Taking notice of any changes that will affect your money is essential in order to be proactive when it comes to tax planning.
Here are several changes that took effect on January 1, 2015 that concerns the 2015 tax year that you should be aware of.
#1. 2015 Standard Deduction.
The standard deduction rises ever so slightly to $12,600 for married couples filing jointly and $6,300 for individuals or those married and filing separately. The standard deduction for heads of households is now $9,250.
#2. Personal Exemptions 2015.
Up from $3,950 in 2014, the personal exemption amount for 2015 increased to $4,000. The phase-out for the personal exemption begins at an adjusted gross income of $258,250 for individuals / $309,900 for married couples filing jointly and phases out completely at $380,750 for individuals / $432,400 for married couples filing jointly.
#3. Alternative Minimum Tax 2015.
Since the IRS seems to think we get a decent amount of tax breaks, the AMT was established in order to set a cap on the amount tax deductions can reduce your tax liability.
In 2015, the AMT exemption is $53,600 for individuals and $83,400 for those married and filing jointly. This represents about a 1.5% increase from 2014.
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#4. 401(k) Contribution Limits 2015.
For those who contribute to their company’s 401(k) plan in 2015, you will be able to contribute a maximum of $18,000, which is $500 more than the limit allowed in 2014.
Note that this change also applies to 403(b) accounts and the majority of 457 retirement plans. Those aged over 50 can also take advantage in 2015 of the opportunity to “catch-up” by contributing an additional $6,000 instead of the prior $5,500 maximum.
#5. IRA Rollover 2015.
The IRS has become wise to those who in the past have made it a practice to withdraw funds from a non-taxable IRA and then re-depositing the funds in a new retirement account, as a way to gain from a short-term interest free loan.
As of 2015, you can only institute one rollover from an IRA in a 12-month timeframe yet you can still transfer your money directly from one provider to another (trustee-to-trustee) as many times as you want.
The rule is somewhat convoluted so check with a tax or investment specialist first if you are planning to rollover your IRA in 2015.
#6. Retirement Savings Contribution Credit 2015.
You may not have heard about it but this tax credit provides eligible taxpayers an additional tax incentive for contributing to their 401(k) and IRA.
Married couples filing jointly with an adjusted gross income of $61,000 or less will benefit along with individuals who report an adjusted gross income of $30,500 in 2015.
#7. Flexible Spending Account Limits 2015.
If you take advantage of a health FSA, then note that the annual employee contribution limit for 2015 is $2,550 which is an increase of $50 from 2014. It may not be much but ever dollar counts.
#8. Affordable Care Act Penalty 2015.
The Affordable Care Act, also known as Obamacare, stipulates that all Americans must be covered by health insurance. The ACA penalty in 2014 for not complying was 1% of your household income, or $95/person.
In 2015 however, the tax bite is significantly bigger. The penalty has increased to 20% of total household income, or $325 per person which for a family of five represents $1,625 in penalties.
#9. Social Security Increase for 2015.
For the millions of Social Security recipients, they will see a slight 1.7% increase in their 2015 benefit payments thanks to the annual cost of living adjustment (COLA).
On the flipside, there will be a 1.3% rise in the amount collected by the SSA on the portion of income subjected to Social Security tax in 2015 and the associated cap on income is now $118,000.
#10 Student Loan Interest Deduction 2015.
The maximum amount you may take as a deduction with regard to interest paid on student loans hasn’t changed in 2015 and remains at $2,500. The change concerns phase-outs that now apply for those who have a modified adjusted gross income (MAGI) over $65,000 as an individual or $130,000 for those married filing jointly.
The deduction is completely phased out for individual taxpayers who have a MAGI of $80,000 and $160,000 for those married filing jointly.
The above list is a sample of over 40 updates that the IRS has published with regard to the 2015 calendar tax year. For detailed information, consult the IRS Revenue Procedure 2014-61.