Every year the U.S. tax code undergoes changes that can affect the amount we owe the IRS. Knowing and planning for these changes can help you save money and confusion this year.
Here are some key changes to be aware of.
401 (k) Contribution Limits
For the past two years, 2013-2013, the contribution limit for 401 (k) retirement account was fixed at $17,500 plus another $5,500 “catch up”. This year the amount has risen to $18,000 with a $6,000 catch up for those 50 years of age and above.401 (k)s, or employer-based retirement plans can be a powerful savings builder. In order to qualify for the catch up contributions you must be of age or turn 50 any time during 2015.
IRA Deduction Eligibility
While IRA contribution limits will remain the same in 2015 ($5,500 plus a $1,000 catch-up for those 50 and older), the deduction for taxpayers making contributions to a traditional IRA is more generous. Here’s what the IRS states, “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. 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 Eligibility
The Roth IRA’s eligibility is also expanding. The AGI phase out range has risen from being between $181,000-$191,000 in 2014 to $183,000-$193,000 in 2015 for married and filing jointly couples. For taxpayers filing as single and head of households, the range has risen from $114,000-$129,000 to between $116,000-$131,000.
IRA Rollovers
Beginning this year, taxpayers will only be able to execute one IRA rollover per year. A rollover involves removing money out of one IRA and putting it into another IRA after holding it for less than 60 days.
myRA
The myRA, my Retirement Account, is a new retirement account created by the U.S. Department of the Treasury, designed to be offered through employers. The myRA doesn’t have any fees and offers modest, guaranteed growth, ensuring that you won’t lose any money. A myRA account can be started with as little as $25 and you can add a minimum of $5 at a time. The contributions levels for myRA are the same as for IRAs ($5,5000 with a $1,000 catch-up). Once your account reaches $15,000 it has to be transferred into a private sector Roth IRA.
SEP IRA Contribution Limits
For taxpayers who are self-employed, contribution limits rise to $53,000 in 2015 and compensation limits rise to $265,000. These limits apply to solo 401 (k)s as well.
SIMPLE IRA Contribution Limits
In 2015, you will be able to contribute as much as $12,500 plus a $3,000 catch up if you are 50 and older.
Health Savings Account Eligibility
This year you will no longer be eligible for a Health Savings Account if you forward any FSA money. This new rule has confused many people. You can read more here or contact your tax professionals.
Health Insurance Penalty
The penalty for opting out of healthcare coverage has risen this you. In 2014, the penalty for opting out of the “minimum essential coverage” had a penalty of 1% of their income above the tax filing threshold ($95 per adult, $47.50 per child, and a $285 family maximum. For 2015, the penalty has doubled to 2% of your income ($325 per adult, $162.50 per child, and a family maximum of $975). The penalty will continue to rise in 2016.
While these new tax laws are the ones that will most likely affect you, there are many other new tax laws in 2015 that are worth learning about as well. If you have questions concerning the new laws and how they affect you contact your tax team at 888-737-0200 or visit http://www.advocatetaxsolutions.com