As you are probably gearing up and readying your papers for 2015 tax filing, I thought of listing out some 2015 tax code changes that you should keep in mind while filing your tax returns in 2016. All of these changes affect common man, people like you and I.
The tax brackets and rates have all changed as we already know, but there are some minor, hidden and not-so-well-known facts that we often fail to identify and point out to our tax consultants. Hope this can help many among us.
For a quick glance on 2015 changes in retirement benefits and contributions, IRS published a summary table.
It is crucial for every tax payer to be informed about some modifications in the tax code and some of these are as follows:
Only change in unemployment benefit is driven by court order. Any unemployment money that you receive from your previous employer is a taxable income and from 2015 onward, social security taxes will be deducted from the source and withheld.
You’ll have to continue to add total unemployment benefit, form fed and from your employer in your adjusted gross income.
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Every year the rates and brackets change, 2015 is no exception. Make sure for your investment and saving planning purpose, you refer to the rates regularly. A couple of thousand more in retirement saving can bring down your tax rates.
For me, this is the biggest of all changes. a great news for people who are already putting maximum amount in retirement accounts. Annual contribution has been increased to $18,000 per year. If you’re more than 50 years old, you can save up to $6,000 additional in catch up contribution as well, making your total retirement fund (401k, 403b, etc) contribution for the year to be $24,000.
This conveys that if you provide care for a person or non-skilled support services, who reside in your home, who suffers from emotional, mental and physical issues and you obtained payments from certified or state Medicaid provider, then, this means that those payments are apt to be excluded from the taxable income even though the person is related to you.
This is not a very good news for tax payers. Since 2013 you perhaps been carrying over $500 to next years FSA account. This benefit will continue, however if you want to have a HSA account then with the carry over money, you can’t open HSA account.
That essentially boils down to you making go of the residual money in FSA in order to open a HSA account the next year.
I do have a HSA account so I am not affected by this. If you’re an FSA account holder who wants to switch over to HSA, then wither spend all your money or forget the amount remaining in FSA at the end of the year.
Additionally annual contribution to FSA has been increased by $50 to $1,250.
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Beginning January 1st, people can only rollover from one IRA to another IRA once in a year. This pertains to withdrawing the funds from a single IRA, keeping them for less than sixty days and afterwards deposits them into another IRA account.
Changes affecting students
Interest rate on student loans will probably increase, but it all depends on 10 year T notes rates in May 2015. Pell grant amount has been increased by $100 to $5,830. You qualify for Pell grant (which you don’t have to repay) if your family income is less than $40,000 per year.
IRS treats any form of virtual currency as property. So, all tax laws that otherwise apply to properties apply to virtual currencies as well.
If you receive Bitcoin then you should add that income in your gross income by converting the Bitcoin value in USD, as per the conversion rate on the day you receive it.
The $60K Social Security bonus
It is important to take into account that Social Security secrets can guarantee increment in retirees’ retirement income of about $60,000. Surprisingly many are not aware of this fact.
This is new and related to Obama Care. Not having health insurance adds additional tax burden. This penalty in 2015 increased to 2% of gross income or $325 per person, whichever is higher. Health insurance is essential, I hope all my readers have health insurance.