2015 Cost of Living Increases

The IRS has announced most of the annual inflation adjustments for tax year 2015. These include 2015 tax rate schedules and cost-of-living increases for several important tax items.

2015 Tax Brackets
Note carefully that these tax brackets take effect on January 1, 2015. They do not apply to your 2014 taxes.

The brackets show a modest expansion over 2014, and this will slightly lower everyone’s income taxes. For example, in 2014, the 10% bracket applied on income up to $9,075 for singles and $18,150 for married couples filing jointly. In 2015, the 10% bracket applies up to $9,225 for singles and $18,450 for married couples—an increase of $150 and $300 respectively. This means that you’ll pay a 10% income tax instead of a 15% tax on that additional amount of income in 2015. A savings of $15 for singles and $30 for married couples.

On the other end of the income scale, the top tax rate of 39.6% applies to singles whose income in 2015 exceeds $413,200, $464,850 for married couples filing jointly, up from $406,750 and $457,600 in 2014, respectively.

Standard Deduction
The standard deduction has also gone up. The standard deduction for singles in 2015 is $6,300 and $12,600 for marrieds filing jointly. An increase of $100 and $200 respectively. The standard deduction for heads of households has gone up to $9,250 for 2015; it was $9,100 in 2014.

Personal Exemption
The personal exemption in 2015 is $4,000, up from $3,950 in 2014. However, the exemption is phased out for individuals with adjusted gross incomes of $258,250-$380,750, and for married couples with AGIs of $300,900-$432,400.

Itemized Deductions
The ability to take itemized deductions is also phased out for taxpayers whose incomes exceed certain levels. For 2015, these “Pease limitations” begin for individual taxpayers with incomes of $258,250 or more, $309,900 for married couples filing jointly.

AMT
The Alternative Minimum Tax exemption amount for 2015 is $53,600 for singles, and $83,400 for marrieds filing jointly, up from $52,800 and $82,100 respectively.
Kiddie Tax
The amount of unearned income a child can receive without have to pay income tax is $1,050 for 2015, the same as for 2014.

Retirement Plan Contribution Limits
The annual contribution limit for employees who participate in 401(k), 403(b), and most 457 retirements plans is $18,000 in 2015, up from $17,500 in 2014. The catch-up contribution limit for employees aged 50 and over who participate in such plans is $6,000 in 2015, up from $5,500 in 2014.
Self-employed taxpayers with solo 401(k) plans or SEP-IRAs may contribute up to $53,000 in 2015, up from $52,000 in 2014.

IRAs
The limit on annual contributions to Individual Retirement Arrangements (IRAs) remains unchanged for 2015 at $5,500. The additional catch-up contribution limit for individuals aged 50 and over remains $1,000.

Estate Tax
Estates of people who die during 2015 will have a basic exclusion amount of $5,430,000, up from $5,340,000 for 2014. Meanwhile, the annual exclusion for gifts remains at $14,000 for 2015. 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.

 

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