With the 2015 tax year right around the corner, there is good news coming from the IRS. According to a recent announcement, the tax agency has increased several tax breaks due to inflation adjustments.
Here is a rundown of some of the changes:
Contributions to 401(k) and 403(b) Plans. Taxpayers can contribute up to $18,000 for 2015, up $500 from 2014. The catch-up contribution amount for those age 50 and older increases to $6,000 from $5,500.
IRAs. The limit on annual contributions to traditional and Roth IRAs remains unchanged at $5,500 for 2015. The extra catch-up contribution for those age 50 and over remains $1,000.
Phase-out amounts for traditional IRAs. The deduction for taxpayers making contributions to a traditional IRA is phased out in 2015 for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Phase-out amounts for Roth IRAs. The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.
For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The 2015 AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014. For heads of household, it is $45,750, up from $45,000; and for married individuals filing separately and for singles, it is $30,500, up from $30,000.
Social Security Checks to Increase Too
Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced.
The 1.7 percent cost-of-living adjustment will begin with benefits that nearly 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014.
Some other Social Security changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Federal law ties the annual cost-of-living adjustment to the increase in the Consumer Price Index as determined by the Department of Labor's Bureau of Labor Statistics.
Here are some other retirement plan amounts:
Qualified Plan Limits
|Defined Contribution Plan Dollar limit on additions on Sections 415(c)(1)(A)||$53,000||$52,000|
|The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A)||$210,000||$210,000|
|Annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii)||$265,000||$260,000|
|SIMPLE deferrals under Section 408(p)(2)(E)||$12,500||$12,000|
|Compensation defining highly compensated employee under Section 414(q)(1)(B)||$120,000||$115,000|
|Compensation defining key employee in a top-heavy plan under Section 416(i)(1)(A)(i)||$170,000||$170,000|
|Compensation triggering Simplified Employee Pension contribution requirement under Section 408(k)(2)(E)||$600||$550|
If you have questions about these or other tax issues, contact your tax advisor.