The best way to plan for taxes is to start at the beginning of the tax year. So it’s important to know how the tax laws change so you can plan to take every advantage to keep as much of your income as you’re entitled to.
What’s New for Business Owners
- Standard Mileage: You’re now able to expense .57.5 cents per mile, a .1.5 percent increase over last year.
- Limit for Small Business Health Expenses: Health expenses are set to a limit of $25,800 to qualify for the Small Employer Health Care Tax Credit.
- Big Ticket Expenses: In 2015, you can no longer claim the entire expense of major equipment all in the tax year you purchase it. Also, the maximum deductible is now $25,000 of the initial $200,000 of the purchase. The fifty percent bonus depreciation and accelerated deduction have both been eliminated.
What’s New for Individuals
Inflation has impacted scores of tax mechanisms for 2015 such as retirement contribution maximums, tax bracket cutoffs and personal exemptions.
- The Kiddie Tax: A child’s unearned income can be reduced now by $1,050 starting in 2015—this is up $50 from 2014. A parent can include the child’s unearned income on their own tax return as long as the total is between $1,050 and $10,500. If the income is over the max, the child will have to have their own separate income filed for them.
- AMT or, Alternative Minimum Tax: The exemption amounts for 2015 are $53,600 for single taxpayers and for married filing jointly taxpayers it’s $83,400.
- HSA or, Health Savings Accounts: The minimum deductibles for a qualified High Deductible Health Plan did not increase for 2015 ($1,250 filing single and $2,500 for families). However, the limit on out-of-pocket expenses went up $100 to $6,350 for single taxpayers and for families the limit increased $200 ($12,700) for families.
- MSA or Medical Savings Accounts: Beginning in 2015, Self-only coverage with a high deductible of at least $2,200 and a max of $3,300 are deductible and the out of pocket expense can not exceed $4,450. For Family coverage, the minimum deductible is $4,450 and the max is $6,650; the annual out-of-pocket expense must not go over $8,150.
- Adjusted Gross Income for Medical Expense Deductibles: The amount remains at 10% of your AGI in 2015. But if you or your spouse are over the age of 65 on December 31st of 2014, the ten percent will not take effect for you until 2017. It will continue to be 7.5% of your adjusted gross income.
- Taxes on Medicare: The .9% Medicare tax on people making over $200k ($250k married filing jointly) remains in effect for 2015. Also, the 3.8% Medicare tax on unearned income remains as well.
- Premiums for Long-term Care: People younger than forty can deduct $380 of premiums on long-term care. Those forty to forty-nine can deduct $710, and those fifty to fifty-nine can deduct $1,430. Taxpayers age sixty to sixty-nine can deduct $3,800 and the maximum those over seventy can deduct is $4,750.
- Dividends & Long-term Capital Gains: Previous tax rates will continue for 2015 although the cutoffs were adjusted to account for inflation. Zero percent for those in the ten and fifteen tax bracket. Those at twenty-five, twenty-eight, thirty-three and thirty-five are at fifteen percent. And those in the highest bracket of 39.6%, which is at or above $413,200 for single taxpayers and $464,850 married filing jointly, the rate maxes out at twenty percent.
- Foreign Income: The exclusion for foreign earned income is up $1,600 from $99,200 to $100,800.
- Taxes on Gifts and Estates: The exclusion for descendants was raised from $5,340,000 to $5,430,000. The max rate and yearly exclusion remained at forty percent and $14k.
- Personal Exemption Phaseout (PEP) and Pease: Both PEP and Pease have been extended permanently and for 2015 single taxpayers with income over $258,250 will be affected—those married filing jointly with over $309,900 will be affected.
What’s New in Tax Credits for Individuals?
- Adoption: A tax credit of up to $13,400 is obtainable for each child’s adoption expenses where eligibility is met and adoption expenses meet requirements. It’s important to note this credit is non-refundable. It lowers the tax you owe however, should it lower it causing you to have “overpaid”, you will not receive a refund for the difference.
- Child Tax Credit: The credit is $1k per child.
- Child Care & Dependent Care: Those that qualify can get a credit up to a max of $1,050 or 35% of $3k in qualifying expenses. Two, or more than two dependents, may allow you to claim up to 35% of $6k or $2,100 for expenses that meet the requirements. For those with high income the credit is lowered but will not be lower than twenty percent.
What’s New in Education Taxes?
- Education Loans Interest: The deduction limit of 60 months on interest has been removed and the maximum remains at $2,500.
- The American Opportunity Tax Credit: The max credit of $2,500 has been extended until 2017. It remains at $2k for the Lifetime Learning Credit.
What’s New In Retirement Tax Laws?
- Saver’s Credit: The Adjusted Gross Income required for this credit is now $61k for those filing jointly and those filing as Head of Household it’s $45,750. Married couples filing separately the AGI is $30,500 and if filing single, it’s $30k.
- Phase-Out Incomes: When making contributions to a basic IRA, the deduction is being phased out for head of household filers and those filing single and covered by a plan provided by an employer. This is for those just mentioned that have an adjusted gross income between $61k and $71k. If married, that AGI is between $98k and $118k. Should the plan not be an employer-provided plan, the AGI for phase-out is between $183k and $193k. For taxpayers paying towards a Roth IRA it is $183k to $193k for married couples filing jointly. Those filing single or head of household, the income is between $116k and $131k.Those married but filing a separate return and are covered by a plan, the AGI is between $0 and $10k.
Do you have the support you need to manage your small business bookkeeping?
Schedule a 30-minute appointment to speak with a local small business adviser.