It’s not sweeping tax reform. It’s not tax relief to the middle class. It’s the annual indexing of tax numbers. It is a change, and hopefully, these will lighten the burden.
Most of the significant changes in tax law due to Obamacare and the tax compromise passed in January of 2013 have remained in place for 2015.
- The three and eight tenths of a percent (3.8%) Medicare surtax still applies to the investment income of high-income taxpayers.
- The personal exemption phase-out and itemized deductions phase-out for high-income taxpayers are still in effect.
- The top personal income tax bracket of thirty-nine and sixth tenths of a percent (39.6%) is also still in effect, with a slight increase in brackets from 2014 due to cost-of-living adjustments.
- The ability for those older than 70 ½ to transfer money directly from an IRA to charity has not yet been extended to 2015 or beyond.
- The maximum capital gains and qualified dividend rate of fifteen percent (15%) has been retained for most taxpayers, with the twenty percent (20%) rate for those with high-income levels.
A number of figures used in retirement planning have been updated for 2015. Some increased, some didn’t. For example:
- The maximum contribution that can be made to a defined contribution plan in 2014 under Section 415 is the lesser of Fifty three Thousand ($53,000) or One Hundred Percent (100%) of compensation—a One Thousand Dollars ($1,000.00) increase over the 2014 limit.
- The limit on employee elective deferrals to Section 401K and Section 403b plans has increased to Eighteen Thousand Dollars ($18,000.00) in 2015.
- The limit for Section 457 plan salary reductions is Eighteen Thousand Dollars ($18,000.00) in 2015.
- The maximum elective deferral for a SIMPLE or 401 K SIMPLE plan increased to Twelve Thousand Five Hundred Dollars ($12,500.00) in 2015.
- The limit on IRA contributions has stayed constant at Five Thousand Five Hundred Dollars ($5,500.00) for 2015.
- Those 50 and older can still contribute an extra One Thousand Dollars ($1,000.00) under the special catch-up provision.
And here are some other items that may be important to you.
- The federal estate tax exemption has been increased to $5.43 million for 2015.
- The generation skipping tax exemption has been increased to $5.43 million for 2015.
- The annual gift tax exclusion is Fourteen Thousand Dollars ($14,000), unchanged from 2014.
- The modified adjusted gross income (MAGI) level at which Roth IRA contributions start to be phased out in 2015 is at $116,000 for single taxpayers and $183,000 for married taxpayers filing jointly.
- The personal exemption amount has increased by $50 to $4,000.
These changes may affect your retirement plan, your income tax planning and your estate plan.
Take time to review those plans in light of the 2015 numbers.