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A Closer Look: IRS Releases Inflation-Adjusted Amounts for 2015.
(Parker Tax Publishing November 8, 2014)
The IRS has released annual inflation-adjusted amounts for deductions, credits, phaseouts, and retirement plan limitations for 2015. Rev. Proc. 2014-61(10/30/14); IR-2014-99 (10/23/14).
The following is a roundup of the key inflation adjusted tax numbers for 2015.
Taxable Income Subject to the Maximum Rates
The tax rate of 39.6 percent affects singles whose income exceeds $413,200 and married taxpayers filing a joint return whose income exceeds $464,850 (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 thresholds are described in the revenue procedure.
Standard Deduction Amounts
The standard deduction 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). The standard deduction for heads of household rises to $9,250 (up from $9,100).
The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,050 (up from $1,000 in 2014), or (2) the sum of $350 and the individual's earned income (the same as in 2014).
The additional standard deduction amount for the aged or the blind is $1,250 (up from $1,200 in 2014). The additional standard deduction amount is $1,550 (the same as in 2014) if the individual is also unmarried and not a surviving spouse.
Itemized Deduction Limitation
The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
Personal Exemption and Phaseout Amounts
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.)
Alternative Minimum Tax Exemption
The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
Social Security Wage Base
The maximum wage base for the social security portion of FICA and the Self-Employment Tax for 2015 is $118,500, up from $117,000 in 2014 (announced by the Social Security Administration at 78 F.R. 66413, October 28, 2014).
Earned Income Credit
The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have three 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, income thresholds and phaseouts.
Estate Tax Exclusion
Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000 (up from a total of $5,340,000 for estates of decedents who died in 2014).
Limit on Employee Contributions to FSAs
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550 (up $50 from the amount for 2014).
Small Employer Health Insurance Credit
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 tax year 2015 (up from $25,400 for 2014).
Gift Tax Exclusions
The annual exclusion for gifts is $14,000 (which is the same as in 2014).
For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000 (up from $145,000 for 2014).
Kiddie Tax
The amount used to reduce the net unearned income reported on a child's tax return subject to the kiddie tax, is $1,050 (up from $1,000 in 2014).
Foreign Earned Income Exclusion Amount
For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800 (up from $99,200 for 2014).
U.S. Savings Bond Interest Exclusion for Higher Education Expenses
The exclusion from income for U.S. savings bond interest for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $115,750 for joint returns (up from $113,950 in 2014) and $77,200 (up from $76,000 in 2014) for other returns. The exclusion is completely phased out for modified adjusted gross income of $145,750 (up from $143,950 in 2014) for joint returns and $92,200 (up from $91,000 in 2014) for other returns.
Medical Savings Accounts
For purposes of medical savings accounts, a "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,200 (same as in 2014) and not more than $3,300 (up from $3,250 in 2014), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450 (up from $4,350 in 2014).
For family coverage in tax years beginning in 2015, the term "high deductible health plan" means a health plan that has an annual deductible that is not less than $4,450 (up from $4,350 in 2014) and not more than $6,650 (up from $6,550 in 2014), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150 (up from $8,000 in 2014).
Long-Term Care Premiums
The limitations for eligible long-term care premiums includible in the term "medical care" are: for individuals with an attained age of 40 or less before the close of the tax year, $380 (up from $370 in 2014); more than 40 but not more than 50, $710 (up from $700 in 2014); more than 50 but not more than 60, $1,430 (up from $1,400 in 2014); more than 60 but not more than 70, $3,800 (up from $3,720 in 2014); and more than 70, $4,750 (up from $4,660 in 2014).
Attorney Fee Award Limitation
The attorney fee award limitation is $200 per hour (up from $190 in 2014).
Child Adoptions
The credit allowed for an adoption of a child with special needs is $13,400 (up from $13,190 in 2014). The maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,400 (up from $13,190 in 2014). The available adoption credit begins to phase out for taxpayers with modified adjusted gross income in excess of $201,010 (up from $197,880 in 2014) and is completely phased out for taxpayers with modified adjusted gross income of $241,010 (up from $237,880 in 2014) or more.
Hope Scholarship Credit/Lifetime Learning Credit
The Hope Scholarship Credit is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000 plus 25 percent of those expenses in excess of $2,000, but not in excess of $4,000 (the same as for 2014). Accordingly, the maximum Hope Scholarship Credit is $2,500 (the same as for 2014). A taxpayer's modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) (the same as for 2014) is used to determine the reduction in the amount of the Hope Scholarship Credit otherwise allowable. A taxpayer's modified adjusted gross income in excess of $55,000 ($110,000 for a joint return) (up from $54,000 and $108,000, respectively, in 2014) is used to determine the reduction in the amount of the Lifetime Learning Credit otherwise allowable.
Qualified Transportation Fringe Benefit
For taxable years beginning in 2014, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130 (same as in 2014). The monthly limitation for the fringe benefit exclusion amount for qualified parking is $250 (same as in 2014).
Retirement Plans
The 2015 tax-related cost-of-living adjustments (COLAs) for retirement plans were released in IR-2014-99 (10/23/14) and were covered in detail in the October 24, 2014, issue of Parker's Federal Tax Bulletin. The following is a brief summary of the key changes:
IRA Contributions. The limit on annual contributions to an individual retirement arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
IRA Phaseout Amounts. The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000 (up from $60,000 and $70,000 in 2014). For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000 (up from $96,000 to $116,000). For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $183,000 and $193,000 (up from $181,000 and $191,000 in 2014). For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRA AGI Phaseout Amounts. The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly (up from $181,000 to $191,000 in 2014). For singles and heads of household, the income phase-out range is $116,000 to $131,000 (up from $114,000 to $129,000 in 2014). For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Contributions to SEP IRAs and other Defined Contribution Plans. The Code Sec. 415 limitation on contributions to SEP IRAs and other defined contribution plans is increased in 2015 to $53,000 (up from $52,000 in 2014).
Elective Deferrals. The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increased to $18,000 for 2015 (up from $17,500 for 2014).
Catch-up Contributions. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increased to $6,000 (up from $5,500 in 2014). The dollar limitation under Code Sec. 414(v)(2)(B)(ii) for catch-up to a SIMPLE 401(k) plan described in Code Sec. 401(k)(11) or a SIMPLE IRA described in Code Sec. 408(p) for individuals aged 50 or over is increased to $3,000 (up from $2,500 in 2014). (Staff Editor Parker Tax Publishing)
Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.
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