Typically, I do a tax update near the end of the year to discuss any significant changes that will be applicable for the following year. For 2015, the big news is that there is no news. Whereas 2014 had the new Premium Tax Credit and 2013 had several new provisions (e.g., the new 39.6% tax bracket, the 20% tax rate on qualified dividends and long-term capital gains for people in that new tax bracket, and the new 3.8% tax on net investment income), 2015 doesn’t have much that’s entirely new. For the most part, it’s just inflation adjustments.
The tax brackets for 2015 are as follows:
Single 2015 Tax Brackets
Married Filing Jointly 2015 Tax Brackets
Head of Household 2015 Tax Brackets
Married Filing Separately 2015 Tax Brackets
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Standard Deduction Amounts
Due to inflation adjustments, the 2015 standard deduction amounts will be as follows:
- Single or married filing separately: $6,300
- Married filing jointly: $12,600
- Head of household: $9,250
The additional standard deduction for people who have reached age 65 (or who are blind) is $1,250 for married taxpayers or $1,550 for unmarried taxpayers.
Personal Exemption Amount and Phaseout
The personal exemption amount for 2015 is a nice round $4,000.
However, the total personal exemptions to which you’re entitled will be phased out (i.e., reduced and eventually eliminated) as your adjusted gross income (i.e., the last line of the first page of your Form 1040) moves through a certain range.
- For single taxpayers, personal exemptions begin to be phased out at $258,250 and are fully phased out by $380,750.
- For married taxpayers filing jointly, personal exemptions begin to be phased out at $309,900 and are fully phased out by $432,400.
- For taxpayers filing as head of household, personal exemptions begin to be phased out at $284,050 and are fully phased out by $406,550.
- For married taxpayers filing separately, personal exemptions begin to be phased out at $154,950 and are fully phased out by $216,200.
Limitation on Itemized Deductions
As in 2013 and 2014, the amount of itemized deductions which you are allowed to claim is reduced by 3% of the amount by which your adjusted gross income exceeds certain threshold amounts. These threshold amounts are the same as the lower threshold amounts listed above for the personal exemption phaseout (e.g., $258,250 for single taxpayers). However:
- Your itemized deductions cannot be reduced by more than 80% as a result of this limitation, and
- Your itemized deductions for medical expenses, investment interest expense, casualty/theft losses, and gambling losses are not reduced as a result of this limitation.
IRA and 401(k) Contribution Limits
For 2015, the contribution limit to Roth and traditional IRAs is unchanged at $5,500, with an additional catch-up contribution of $1,000 for people age 50 or older.
The contribution limit for 401(k), 403(b), and most 457 plans, however, is increased to $18,000, with an additional catch-up contribution of $6,000 for people age 50 or older.
The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a SEP IRA) is increased from $52,000 to $53,000.
AMT Exemption Amount
After adjusting for inflation, the following are the AMT exemptions for 2015:
- $53,600 for single taxpayers,
- $83,400 for married taxpayers filing jointly, and
- $41,700 for married taxpayers filing separately.
“Shared Responsibility Payment” (Penalty for No Health Insurance)
Perhaps the biggest change for individual income tax is that the calculation of the penalty for having no health insurance is changing (according to schedule) for 2015. In short, the penalty is bigger than it would have been in 2014. (And it will be bigger still in 2016 and beyond.) Healthcare.gov has the details of the calculation here.