Every year laws change with regard to taxation. Sometimes loopholes are closed and other times they are created, based on laws congress passes over the course of the year. While 2015 did not see monumental changes in the way taxes will be filed there are a number of changes and updates that impact consumers. These include the following:
Inflation Adjustments made for the 2015 tax season.
- Earned Income Credit now maxes out at $6,242. This tax credit is based on income and family size. The credit declines on a sliding scale as income and number of children increases.
- Personal Exemption was increased to $4,000.
- Standard Deduction was increased to $6,300 for singles and $12,600 for married couples filing a joint return.
- Maximum Retirement contributions into 401K’s increased to $18,000. For those over 50 the maximum was increased by another $500 to $6,000 additional contributions above the $18,000, for a total of $24,000 in potential contributions each year.
- Child unearned income taxed at the child rate increased to $2,100. Anything over this amount is taxed at the parent’s tax rate.
Ira Transfers are now limited to one every 12 months. Prior to this year rollovers were not limited and consumers could rollover IRA accounts from one provider to another and gain access to retirement funds for 60 days between rollovers, essentially offering a tax free loan. This change does not impact direct transfers from one custodial to another as long as the tax payer never touches the funds.
Health Insurance Tax has increased significantly in 2015. The tax increased to $325 per adult or 2% of income, whichever is greater, for each household member not carrying health insurance. The penalty for the uninsured will continue to rise over the next several years, increasing the incentive to buy a plan. For those who are unable to afford insurance there are still a number of exemptions which can be found at https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/. If you qualify for an exemption, it is recommended you apply for the exemption before filing taxes because you will receive an exemption number that must be included with the tax return.
Flexible Savings Accounts (FSA) have increased the amount of contributions each year to $2,550. Changes have also been made to the “user it or lose it” policy, allowing you to rollover up to $500, if your employer allows it. FSA accounts are benefits sometimes offered by employers allowing you to set aside money to pay healthcare costs not covered by insurance.
If funds are rolled over in a FSA account, you become ineligible to contribute to a HSA (Healthcare Savings Account) for the year of the rollover. HSAs are tax advantaged accounts you can open without an employer and can be used to pay for healthcare costs. HSAs offers larger contributions and unlimited rollovers, making them attractive options for covering healthcare costs. As insurance deductible are increasing, the HSA has become more valuable to consumers planning for future healthcare costs. HAS contributions limits have risen to $3,350 for singles and $6,650 for families.
myRA Accounts have become available retirement vehicles for low income earners or those just starting out. These accounts resemble Roth IRAs and feature low contribution minimums and no fees. While they do not provide an upfront tax deduction, they grow tax free, when withdrawn at retirement.
The tax season for 2015 is extended to April 18th and those who live in Maine or Massachusetts have until April 19th to file.