Tax laws undergo some minor changes each year, such as adjustments for inflation, renewal of deductions, new taxes, and tax increases. As the 2015 tax filing season has begun, it is important to stay informed about the latest changes to the tax code and how they may affect you. This article will explore three key areas where some of the biggest changes have been made to the Internal Revenue Code (IRC).
Changes to the Affordable Care Act for 2015
The Affordable Care Act is the law in the land that requires most people to have health insurance or risk paying a tax penalty. Under individual federal health law mandates, people above certain income thresholds must obtain health insurance coverage if they are not covered by public programs such as Medicare and Medicaid. If health coverage is not provided through her job, a person may choose to purchase an individual private policy or obtain coverage on the state-operated insurance marketplace.
Those who do not have the minimum level of coverage should be careful because they will be subject to IRS penalties at the end of the tax year. Here is a brief summary of the penalties for noncompliance: The penalty for tax year 2014 is one percent of income for both individuals and families or $95 for single adults and $285 for families, whichever is greater. This may not seem like a bad thing compared to insurance premiums; however, the fact is that the penalty structure is designed to increase over time. In 2015, the penalty will increase significantly to $325 per adult and up to $975 per family or 2% of income. In 2016, the penalty will be very high: $695 per individual and $2,085 per family or 2.5% of income.
Small business owners who obtain insurance through the Small Business Health Options Program (SHOP) marketplace may qualify for tax credits and tax exemptions. Businesses that employ fewer than 25 full-time workers and pay average annual wages of less than $50,000 may use this program for group health coverage. Under ObamaCare’s employer mandate, businesses with more than 100 full-time employees will be required to provide health coverage to at least 70% of their workers starting in 2015. This rule does not apply to businesses with 50 to 99 workers a full time until January 1st. , 2016.
New Limits for IRA Rollovers in 2015
Finally, some good news from the IRS! Contribution limits to 401(k), 403(b) and other qualified retirement plans have now increased by $500, bringing them to $18,000 in 2015. The update contribution limit for people age 50 and older has also increased by $500 .
A new year ushered in a new IRS rule that placed restrictions on the amount of IRA-to-IRA rollovers. Starting in 2015, taxpayers can make only one rollover in a 12-month period, regardless of how many IRAs the person has. A second rollover from IRA to 60-day IRA could result in a 10% early withdrawal penalty, and the distribution will be taxable. The old rules allowed people to make one such rollover per year for each IRA they owned, creating penalty- and interest-free loans. Unfortunately, the new change limits taxpayers from making such tax-free rollover provisions.
There’s no reason to be alarmed, as this new rule change does not apply to conversions from Traditional IRAs to Roth IRAs or trustee-to-trustee transfers. This direct transfer method allows investors to transfer funds any number of times between IRA accounts without taking control of the money. This transfer is tax free and does not incur the 10% early withdrawal penalty. Get expert guidance if you have multiple IRAs and plan to make rollovers, but aren’t sure if they’re within the rollover limit or if the distribution is tax-free.
2015 Tax Rates and Other Inflation Changes
For 2015, inflation-based adjustments are made for all tax brackets: the top 39.6% tax bracket, for example, will start at $413,200 for single filers (up from $406,750 in 2014) and $464,850 for married joint filers (versus $457,600). The standard deduction for the 2015 tax year is $6,300 for single filers and $12,600 for married joint filers. The personal exemption gets an increase of another $50 to $4,000 in 2015. People in the 25%, 33%, and 35% federal income tax brackets will pay the same 15% on capital gains, but taxpayers in the 39.6% tranche will have to pay more, as they will now be taxed at a 20% rate on long-term capital gains.
