IRS Announces 2015 Inflation Adjustments on Several Tax Benefits and Retirement Adjustments

The IRS recently announced annual inflation adjustments for several tax provisions, which will apply to the 2015 tax year. Some of the affected provisions include: income tax rate schedules, the estate tax exemption, long-term care adjustments, and retirement adjustments. Below is a summary of those adjustments.

Tax Rates. Beginning in the 2015 tax year, the following tax rates will apply:

If the Taxable Income Is:	The Tax for Married Individuals Filing Jointly is:
Less than or equal to $18,450	10% of the taxable income
Over $18,450 but not over $74,900	$1,845 plus 15% of the excess over $18,450
Over $74,900 but not over $151, 200	$10,312.50 plus 25% of the excess over $74,90010% of the taxable income
Over $151,200 but not over $230,450	$29,387.50 plus 28% of the excess over $151,200
Over $230,450 but not over $411,500	$51,566.50 plus 33% of the excess over $230,450
Over $411,500 but not over $464,850	$111,324 plus 35% of the excess over $411,500
Over $464,850	$129,996.50 plus 39.6% of the excess over $464,850

If the Taxable Income Is:	The Tax for Heads of Households is:
Not over $13,150	10% of the taxable income
Over $13,150 but not over $50,200	$1,315 plus 15% of the excess over $13,150
Over $50,200 but not over $129,600	$6,872.50 plus 25% of the excess over $50,200
Over $129,600 but not over $209,850	$26,722.50 plus 28% of the excess over $129,600
Over $209,850 but not over $411,500	$49,192.50 plus 33% of the excess over $209,850
Over $411,500 but not over $439,000	$115,737 plus 35% of the excess over $411,500
Over $439,000	$125,362 plus 39.6% of the excess over $439,000

If the Taxable Income Is:	The Tax for Unmarried Individuals is:
Not over $9,225	10% of the taxable income
Over $9,225 but not over $37,450	$922.50 plus 15% of the excess over $9,225
Over $37,450 but not over $90, 750	$5,156.25 plus 25% of the excess over $37,450
Over $90,750 but not over $189,300	$18,481.25 plus 28% of the excess over $90,750
Over $189,300 but not over $411,500	$46,075.25 plus 33% of the excess over $189,300
Over $411,500 but not over $413,200	$119,401.25 plus 35% of the excess over $411,500
Over $413,200	$119,996.25 plus 39.9% of the excess over $413,200

If the Taxable Income Is:	The Tax for Married Individuals Filing Separate Returns is:
Not over $9,225	10% of the taxable income
Over $9,225 but not over $37,450	$922.50 plus 15% of the excess over $9,225
Over $37, 450 but not over $75,600	$5,156.25 plus 25% of the excess over $37,450
Over $75,600 but not over $115,225	$14,693.75 plus 28% of the excess over $75,600
Over $115,225 but not over $205,750	$25,788.75 plus 33% of the excess over $115,225
Over $205,750 but not over $232,425	$55,662 plus 35% of the excess over $205,750
Over $232,425	$64,989.25 plus 39.6% of the excess over $232,425

If the Taxable Income Is:	The Tax for Estates and Trusts is:
Not over $2,500	15% of the taxable income
Over $2,500 but not over $5,900	$375 plus 25% of the excess over $2,500
Over $5,900 but not over $9,050	$1,225 plus 28% of the excess over $5,900
Over $9,050 but not over $12,300	$2,107 plus 33% of the excess over $9,050
Over $12,300	$3,179.50 plus 39.6% of the excess over $12,300

Estate Tax Exemption. The Estate Tax is a tax imposed on the transfer of property at a person’s death, for any portion of the decedent’s gross estate that exceeds the Federal Estate Tax Exemption. This year the estate tax exclusion has increased from a total of $5,340,000 to $5,430,000. This means that decedents who die in 2015 have an estate tax exclusion that has increased by $90,000 from the previous year.

Long-term Care. Deductions for Long Term Care Insurance Premiums have increased slightly from 2014. The 2015 deductible limits under §213(d)(10) for eligible long-term care premiums are as follows:

Attained Age Before Close of Taxable Year	Limitation on Premiums
40 or less	$380
More than 40 but not more than 50	$710
More than 50 but not more than 60	$1,430
More than 60 but not more than 70	$3,800
More than 70	$4,750

Retirement Adjustments. The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the government’s Thrift Savings Plan has increased from $17,500 to $18,000. In addition, if you are 50 or over you can contribute an additional $6,000 as a catch-up contribution. However, the limit on annual contributions to IRA accounts remains unchanged at $5,500 with the catch-up contribution limit remaining $1,000.

The deduction for taxpayers making contributions to traditional IRA accounts is phased out gradually starting at an Adjusted Gross Income (AGI) of $61,000 for single taxpayers and heads of households, $98,000 for married couples filing jointly (when the spouse who makes the IRA contribution is covered by a workplace retirement plan), and $183,000 for an IRA contributor not covered by a workplace retirement plan but who is married to someone who is covered. 

The deduction for taxpayers making contributions to a Roth IRA is phased out gradually starting at an AGI of $183,000 for married couples filing jointly and $116,000 for singles and heads of households.

Lastly, the AGI limit for the saver’s credit (retirement savings contribution credit) for low and moderate income workers has also increased slightly for 2015. The credit is now $61,000 for married couples filing jointly, $45,750 for heads of household, and $30,500 for singles and married couples who file separately.

If you have any questions about how these adjustments might affect your tax situation, please feel free to contact our office for further assistance.