US Tax Changes for 2015
Understanding the IRS tax changes and proper planning is the best way to minimise your taxes for tax year 2015. Start with this – what is likely to change in 2015?
- Personal circumstances change?
- Increases / decreases in income?
- Increases / decreases in expenses?
Changes in personal circumstances: When considering your overall tax position for 2015, you should also consider any changes in your personal circumstances. These may have a major influence over your finances and overall tax position. These changes can include:
- Change in filing status (marriage or divorce)
- Birth of a child
- Child no longer qualifying for child credit or kiddie tax
- Moving / relocation
- Purchase or Sale of property
- Purchase / Sale / Distributions from non-US investments
- Gifting and Estate planning (Long-term tax planning)
- Expatriation to avoid taxes
2015 TAX CHANGES AND INCOME TAX RATES TO THE IMPACT OF CHANGES IN YOUR INCOME AND EXPENSES:
EXCLUSIONS, DEDUCTIONS AND EXEMPTIONS
- Foreign Earned Income Exclusion
2014 – $ 99,200
2015 – $ 100,800
2015 STANDARD DEDUCTION, ITEMIZED DEDUCTION AND PERSONAL EXEMPTION
The income threshold for both PEP (Phaseout of Personal Exemption) and Pease Limitations, the limitation for itemized deductions (named for former Rep. Donald Pease), will be $258,250 for single filers and $309,900 for married filers. The PEP phaseout will end at $380,750 for singles and $432,400 for couples filing jointly, meaning these taxpayers will no longer have a personal exemption.
The personal exemption for 2015 is up to $4,000, from $3,950 in 2014. Phase-outs for personal exemption amounts (sometimes called “PEP”) begin with adjusted gross incomes below, and complete phase out is at $380,750 ($432,400 for married couples filing jointly.)
2015 EARNED INCOME TAX CREDIT PARAMETERS
CHILD RELATED CREDITS OR TAXES
- Child Tax Credit. For 2015, the value used to determine the amount of credit that may be refundable is $3,000 (the credit amount has not changed). Keep in mind that this is the value of the expenses used to determine the credit and not the actual amount of the credit.
- Adoption Credit. For 2015, the credit allowed for an adoption of a child with special needs is $13,400, and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,400. Phaseouts do apply beginning at taxpayers with modified adjusted gross income (MAGI) in excess of $201,010 and completely phased out for taxpayers with MAGI of $241,010 or more.
- Kiddie Tax. For 2015, the threshold for the kiddie tax – meaning the amount of unearned net income that a child can take home without paying any federal income tax – is $1,050.
HEALTH CARE AND FRINGE BENEFIT UPDATES
- Flexible Spending Accounts. The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending accounts (FSA) edges up to $2,550 for 2015 (up from $2,500).
- Qualified Transportation Fringe Benefit. For 2015, the monthly limitation for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation for qualified parking is $250.
EXEMPTION AMOUNTS FOR ALTERNATIVE MINIMUM TAX
- Elective Contribution Limits. The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $17,500 in 2014 to $18,000 in 2015. 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 is increased from $5,500 in 2014 to $6,000 in 2015.
- 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 remains at $1,000.
FEDERAL ESTATE AND GIFT TAX UPDATES
- Federal Estate Tax Exemption. 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.
- Federal Gift Tax Exclusion. The annual exclusion for gifts remains at $14,000 for 2015. The exclusion from tax on a gift to a spouse who is not a US citizen is $147,000, up from $145,000 for 2014.
TRUSTS AND ESTATES INCOME TAX RATES
For calendar year 2015, an individual is a covered expatriate if the individual’s “average annual net income tax” under §877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $160,000. For taxable years beginning in 2015, the amount that would be includible in the gross income of a covered expatriate by reason of §877A(a)(1) is reduced (but not below zero) by $690,000.
If you need guidance on any tax issues, contact us to discuss.