Monday, November 17, 2014

2015 Cost-of-Living Tax Adjustment

GS CPA writes: The IRS recently issued cost-of-living adjustments for the 2015 year.  With inflation remaining in check, most amounts increased only slightly, and some stayed at 2014 levels.
Ordinary Income Tax 
Tax brackets will widen and personal exemptions will increase slightly for 2015.
Tax-bracket thresholds increase for each filing status, but because they are based on percentages, they increase more significantly for the higher brackets.
2015 Ordinary Income Tax Brackets
Tax rate
Single
Head of household
Married filing jointly or surviving spouse
Married filing separately
10%
$0 – $9,225$0 – $13,150$0 – $18,450$0 -  $9,225
15%
$9,226 – $37,450
$13,151 – $50,200
$18,451 – $74,900
$9,226 – $37,450
25%
$37,451 – $90,750
$50,201 – $129,600$74,901 – $151,200$37,451 – $75,600
28%
$90,751 – $89,300
$129,601 – $209,850
$151,201 – $230,450$75,601 – $115,225
33%
$189,301 – $411,500
$209,851 – $411,500
$230,451 – $411,500
$115,226 – $205,750
35%
$411,501 – $413,200$411,501 – $439,000$411,501 – $464,850
$205,751 – $232,425
39.6%
Over $413,200Over $439,000Over $464,850
Over $232,425

The personal and dependency exemption increases to $4,000 for 2015.  The exemption is subject to a phase-out, which reduces exemptions above certain income levels.
Your income may also affect some of your itemized deductions. An AGI-based limit reduces certain otherwise allowable deductions by 3% of the amount by which a taxpayer’s AGI exceeds the applicable threshold.  For 2015, the thresholds are $309,900 for joint filers, $284,050 for head of households, $258,250 for singles and $154,950 for married filing separate.
AMT
The alternative minimum tax (AMT) is a separate tax calculation with rules that limit or eliminate some deductions, and even treats certain income items differently.  If your AMT liability is greater than your regular tax liability, you must pay AMT.
Like the regular tax brackets, the AMT brackets are annually indexed for inflation.  The 28% bracket will increase by $2,900 for all filing statuses except married filing separately, which increases by half that amount.
2015 AMT brackets
Tax rate
Single
Head of household
Married filing jointly or surviving spouse
Married filing separately
26%
$0 - $185,400
$0 - $185,400$0 - $185,400$0 - $92,700
28%
Over $185,400Over $185,400Over $185,400
Over $92,700
AMT exemptions and exemption phase-outs are also indexed. The exemption amounts for 2015 are $53,600 for single and head of households, $83,400 for joint filers, and $41,700 for married filing separate.
Education and Child-related Credits
Most education- and child-related credits remain the same for 2015.  However, most of these credits are limited or even eliminated based on the taxpayer’s modified adjusted gross income (MAGI).
The MAGI phase-out ranges generally remain the same or increase modestly for 2015, depending on the credit. For example:
  • The American Opportunity credit. The MAGI phase-out ranges for this education credit (maximum $2,500 per eligible student) remain the same for 2015: $160,000–$180,000 for joint filers and $80,000–$90,000 for other filers.
  • The Lifetime Learning credit. The MAGI phase-out ranges for this education credit (maximum $2,000 per tax return) increase for 2015:  $110,000–$130,000 for joint filers and $55,000–$65,000 for other filers.
  • The adoption credit. The MAGI phase-out ranges for this credit also increase for 2015 —$201,010–$241,010 for joint, head-of-household and single filers. The maximum credit increases by $210, to $13,400 for 2015.
Note: Married couples filing separately generally are not eligible for these credits.
These are only some of the education- and child-related credits that may benefit you. Keep in mind that, if your MAGI is too high for you to qualify for a credit for your child’s education, your child might be eligible.

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