Even though most of us are still gathering last year’s information for filing our 2014 income taxes, we need to be thinking about the tax changes for 2015. The tax thresholds are up about 1.6% from 2014.
Tax brackets for 2015 have been adjusted upward for inflation:
| Tax Rate | Single 2014 | Single 2015 | Married 2014 | Married 2015 |
| 10% | Up to $9,075 | up to $9,225 | Up to $18,150 | up to $18,450 |
| 15% | $9,076-$36,900 | $9,226-$37,450 | $18,151-$73,800 | $18,451-$74,900 |
| 25% | $36,901-$89,350 | $37,451-$90,750 | $73,801-$148,850 | $74,901-$151,200 |
| 28% | $89,351-$186,350 | $90,751-$189,300 | $148,851-$226,850 | $151,201-$230,450 |
| 33% | $186,351-$405,100 | $189,301-$411,500 | $226,851-$405,100 | $230,451-$411,500 |
| 35% | $405,101-$406,750 | $411,501-$413,200 | $401,101-$457,600 | $411,501-$464,850 |
| 39.6% | $406,751 and above | $413,201 and above | $457,601 and above | $464,851 and above |
For higher income taxpayers with the additional 3.8% Net Investment Income Tax and the additional Medicare Tax of 0.09% on compensation, the top effective rate is 43.4% on dividends, interest and short term capital gains and 23.4 % for qualified dividends and long term capital gains. The difference in short term versus long term capital gains rates makes the strategy of holding investments longer more attractive.
The standard deduction for 2015 has been raised to $6,300 for single filers and $12,600 for married filing jointly. Personal exemptions are also going up $50 per person to $4,000.
As always in tax planning we say to “pay yourself first” by contributing to your retirement plan at work or another retirement vehicle. The limits in these have changed also. Taxpayers may now contribute up to $18,000 to their 401(K) with an additional catch up contribution allowed for those over the age of 50 of $6,000. This means if you want to maximize your contributions at work be sure to tell your payroll department to adjust your amounts.
IRA contribution limits for deductible IRAs for 2015 has not changed and remain at $5,500 for everyone under the age of 50 with a catch amount of $1,000 for those over 50.
The income limits for contribution to a ROTH IRA has increased by $2,000 to $116,000 or more but less than $131,000 for individuals and $183,000 for married taxpayers.
One new change in 2015 concerns IRA rollovers. Effective January 2, 2015 only one rollover from one IRA to another in any 12 month period of time is allowed. This applies to indirect rollovers, which occurs when the IRA owner takes a distribution and then moves the funds to another IRA. This does not affect an IRA to another IRA rollover or transfer often called a trustee to trustee transfer or direct rollover. This is really aimed at taxpayers who withdraw IRA funds for a short period of time and then re-deposit the funds in a different IRA account almost like a short term, interest free loan to themselves.
So even though your concerns for your taxes are still on 2014 and may be so until April 15th the best way to plan effectively is to plan ahead and start now for 2015.