- High-incomers lose their itemized deductions above a higher level this year. Their write-offs are slashed by 3% of the excess of AGI over $258,250 for singles, $284,050 for household heads and $309,900 for marrieds. But the total reduction can’t exceed 80% of itemizations. Medicals, investment interest, casualty losses and gambling losses (to the extent of winnings) are exempted from this cutback.
- The 20% top rate on dividends and long-term gains starts at a higher level for 2015…. singles with taxable income above $413,200, household heads over $439,000 and joint filers above $464,850. The 3.8% Medicare surtax boosts the rate to 23.8%. The regular 15% maximum rate applies for filers with incomes below these amounts, except that filers in the 10% or 15% income tax bracket
- The annual caps on deductible contributions to HSAs inch up this year. The ceilings rise slightly to $6,650 for account owners with family coverage and to $3,350 for self-only coverage. Folks born before 1961 can put in $1,000 more. The limits on out-of-pocket costs, such as deductibles and copayments, will increase to $12,900 for people with family coverage and to $6,450 for individual coverage. Minimum policy deductibles increase to $2,600 for families and $1,300 for singles.
- The adoption credit can be taken on up to $13,400 of costs, a $210 boost. If the credit is more than a filer’s tax liability, the excess is not refundable. The full $13,400 credit is available for a special needs adoption, even if it cost less. The credit starts to dry up for filers with AGIs over $201,010 and ends at $241,010. The exclusion for company-paid adoption aid also increases to $13,400.
- The kiddie tax has a little less bite. The first $1,050 of unearned income of a dependent who doesn’t work is tax-free, a $50 hike. The next $1,050 is taxed at 10%, and any unearned income over $2,100 is taxed at the parents’ rate.
- Many key dollar limits on retirement plans are a little higher this year: The maximum 401(k) contribution rises to $18,000, up $500 from 2014. Individuals who were born before 1966 are allowed to put in as much as $24,000. These pay in limits apply to 403(b) and 457 plans as well. The ceiling on SIMPLEs increases to $12,500…$15,500 for individuals who are age 50 or older this year.
- Retirement plan contributions can be based on up to $265,000 of salary. The payin limitation for defined contribution plans increases to $53,000. Anyone making over $120,000 is highly paid for plan discrimination testing.
- The income ceilings on Roth IRA payins tick upward. Contributions phase out at AGIs of $183,000 to $193,000 for couples and $116,000 to $131,000 for singles.
- Deduction phaseouts for regular IRAs start at higher levels as well, ranging from $98,000 to $118,000 of AGI for couples and from $61,000 to $71,000 for singles. If only one spouse is covered by a plan, the phase out zone for deducting a contribution for the spouse who isn’t covered begins at $183,000 of AGI and finishes at $193,000.
- The IRA and Roth payin caps remain at $5,500…$6,500 for those 50 and up.
- The estate and gift tax exemption for 2015 jumps to $5,430,000. The rate remains 40%. The gift tax exclusion stays the same…$14,000 per donee. Up to $1,100,000 of farm or business realty can receive discount estate tax valuation.
- If one or more closely held businesses make up greater than 35% of an estate, as much as $588,000 of tax can be deferred, and IRS will charge only 2% interest.
- The standard mileage rate rises to 57.5 ₵ a mile for business driving, up 1.5 ₵. The rate falls to 23 ₵ a mile for medical travel and moving and remains at 14 ₵ for charitable driving. Standard rate users can also deduct the cost of parking and tolls.
- More small firms that offer health coverage can get a tax credit for doing so. The full credit is available only to firms with 10 or fewer full-time-equivalent employees and average wages of $25,800 or less, up by $400. The credit diminishes rapidly for companies with more employees and higher average pay, phasing out completely for businesses with more than 25 workers or average pay in excess of $51,600.
- Expensing is slashed. Only $25,000 of assets qualify, down from $500,000, and the $25,000 phases out once more than $200,000 of assets are put in service.
- 50% bonus depreciation lapsed, as have other breaks, such as the R&D credit and 15-year depreciation for restaurant renovations and leasehold improvements.
- Lawmakers will have to find time in 2015 to address the expired provisions.
- And the Supreme Court could throw a wrench into the health reform law. The high court will tackle the issue of whether health premium tax credits are limited to those who buy coverage on a state-run exchange. A decision against the government would nix credits to buyers of insurance on exchanges run by the feds. In addition, it would weaken the employer mandate because an employer’s liability for the fine is tied to its employees receiving a credit for insurance bought on an exchange.
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