It's that time of year! Maybe you are already gathering documents and determining what you owe – and, more importantly, what you can deduct. Maybe you are more of a last minute person. Either way, here is some help for preparing your 2014 tax returns, including five tax changes to anticipate in 2015:
1. Increase to The Standard Deduction
The standard deduction for 2015 will increase $100 for single filers and $200 for married couples who file jointly. For the 2015 tax year, it goes up to $6,300 and $12,600, respectively.
2. IRA Rollovers Limited
With an IRA rollover, you can take money from an individual retirement account and put it into either another IRA or back into the same account. If the money is deposited back within 60 days, the process is tax-free. These withdrawals are commonly used as short-term personal loans, without any interest or tax consequences. In the 2015 tax year, you will be able to take just one rollover every 12 months, starting from the date of the rollover. Direct transfers aren’t affected by this rule, so IRA holders can move their savings straight from account to account as many times as they like.
3. Adjustments to Tax Brackets
Income tax benchmarks for 2015 have been adjusted for inflation. For example, married couples filing jointly with a 2014 household income of under $18,150 will qualify for a 10 percent tax rate when they file their 2014 returns. For the 2015 tax year, the tax bracket will rise to $18,450.
4. Increase to 401(k) Contributions
Employees under age 50 can contribute a maximum annual amount of $17,500 to a 401(k) or 403(b) retirement savings account for the 2014 tax year. Workers over age 50 can contribute an additional $5,500 or a maximum of $23,000. In the 2015 tax year, those annual limits rise $500 to $18,000 – with an additional $6,000 contribution for workers over 50.
5. Changes to Flexible Spending Accounts (FSA)
If you use an employee-sponsored flexible spending account (FSA) for setting aside pretax money to pay for certain medical and care expenses, the maximum amount you could contribute in 2014 was $2,500. For the 2015 tax year, it has gone up $50 for a total $2,550.
There’s also been a change in rollovers for FSAs. Starting in 2013, over $500 of a previous year’s FSA could be rolled into the next year. However, beginning in 2015, if you carry more than $500 of an FSA into the next year, you become ineligible to participate in a general services Health Savings Account (HSA).
For tax preparation in Washington DC, consult Myrick CPA, whose services include tax planning and tax preparation, payroll, and financial reporting to clients throughout the Washington, DC area.