From tax credits and educational expenses to the AMT, many of the tax provisions affecting individuals for 2015 were related to the signing of the American Taxpayer Relief Act (ATRA) in 2012…
…tax provisions that were modified, made permanent, or extended. With that in mind, here’s what individuals and families need to know about tax provisions for 2015.
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Personal Exemptions
The personal and dependent exemption for tax year 2015 is $4,000.
Standard Deductions
The standard deduction for married couples filing a joint return in 2015 is $12,600. For singles and married individuals filing separately, it is $6,300, and for heads of household the deduction is $9,250.
The additional standard deduction for blind people and senior citizens in 2015 is $1,250 for married individuals and $1,550 for singles and heads of household.
Income Tax Rates
In 2015 the top tax rate of 39.6 percent affects individuals whose income exceeds $413,201 ($464,851 for married taxpayers filing a joint return). Marginal tax rates for 2015–10, 15, 25, 28, 33 and 35 percent–remain the same as in prior years.
Due to inflation, tax-bracket thresholds increased for every filing status. For example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $74,900 for a married couple filing a joint return.
Estate and Gift Taxes
In 2015 there is an exemption of $5.43 million per individual for estate, gift and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $14,000.
Alternative Minimum Tax (AMT)
AMT exemption amounts were made permanent and indexed for inflation retroactive to 2012. In addition, non-refundable personal credits can now be used against the AMT.
For 2015, exemption amounts are $53,600 for single and head of household filers, $83,400 for married people filing jointly and for qualifying widows or widowers, and $41,700 for married people filing separately.
Marriage Penalty Relief
The basic standard deduction for a married couple filing jointly in 2015 is $12,600.
Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations were made permanent by ATRA (indexed for inflation) and affect taxpayers with income at or above $258,250 (single filers) and $309,900 for married filing jointly in tax year 2015.
Flexible Spending Accounts (FSA)
Flexible Spending Accounts are limited to $2,550 per year in 2015 and apply only to salary reduction contributions under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.
Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
Further, employers may allow people to carry over into the next calendar year up to $500 in their accounts, but aren’t required to do so.
Long Term Capital Gains
In 2015 taxpayers in the lower tax brackets (10 and 15 percent) pay zero percent on long-term capital gains. For taxpayers in the middle four tax brackets the rate is 15 percent and for taxpayers whose income is at or above $413,201 ($464,851 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.
Individuals – Retirement
Contribution Limits
For 2015, 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 is $18,000. For persons age 50 or older in 2015, the limit is $24,000 ($6,000 catch-up contribution). Contribution limits for SIMPLE plans remain at $12,500 for persons under age 50 and $15,500 for persons age 50 or older in 2015. The maximum compensation used to determine contributions increased to $265,000.
Saver’s Credit
In 2015, the AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and-moderate-income workers is $61,000 for married couples filing jointly, $45,750 for heads of household, and $30,500 for married individuals filing separately and for singles.