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 of the land that requires most people to have health insurance or risk paying a tax penalty. Under the individual mandate of federal health law, individuals who exceed 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 work, a person can choose to purchase an individual private policy or obtain coverage in the state-operated insurance market.
Those who do not have the minimum level of coverage should be careful because they will be subject to penalties from the IRS at the end of the tax year. Here’s 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 sanctions structure is formulated 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 fine will be very high: $ 695 per person 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 less than 25 full-time workers and pay average annual wages of less than $ 50,000 can avail this program for group health coverage. Under the ObamaCare employer mandate, companies with more than 100 full-time employees must provide health coverage to at least 70% of their workers as of 2015. This rule does not apply to companies with 50 to 99 workers at full time until January 1. , 2016.
New limits for IRA reinvestments in 2015
Finally, good news from the IRS! The contribution limits for 401 (k), 403 (b) and other qualified retirement plans have now increased by $ 500, bringing them to $ 18,000 in 2015. The recovery contribution limit for people who have 50 years or more has also increased by $ 500.
A new year ushered in a new IRS rule that placed restrictions on the number of transfers from IRA to IRA. Starting in 2015, taxpayers can make only one rollover in a 12-month period, regardless of how many IRAs the person has. A second transfer from IRA to IRA of 60 days could result in an early withdrawal penalty of 10%, and the distribution will be taxable. Previous rules allowed people to make one such rollover per year for each IRA they owned, creating loans without penalties or interest. Unfortunately, the new change limits taxpayers from making such reinvestment provisions tax-free.
There is no reason to be alarmed, as this new rule change does not apply to traditional IRA to Roth IRA conversions or trustee-to-trustee transfers. This direct rollover 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 generate the 10% early withdrawal penalty. Get expert guidance if you have multiple IRAs and plan to make transfers, but are unsure if they are within the rollover limit or if the distribution is tax-free.
2015 tax rates and other changes in inflation
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 taxpayers (compared to $ 406,750 in 2014) and $ 464,850 for taxpayers. married sets (compared to $ 457,600). The standard deduction for tax year 2015 is $ 6,300 for single filers and $ 12,600 for joint married 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 they will have to pay more, as they will now be charged a 20% rate on long-term capital gains.