Tax Changes to Know for Tax Year 2015

Tax breaks, credits and values change each year. Every year many tax breaks are adjusted for inflation. We’ve complied a list of tax changes that may be valuable to you for Tax Year 2015.

  • Exemptions: Personal and dependent exemptions have increased in value from $3,950 to $4,000 in 2015.
  • Standard Deduction: The standard deduction amount for each filing status has increased, please click here to see standard deduction amounts.
  • Earned Income Tax Credit (EITC): The maximum value of the Earned Income Tax Credit has increased in 2015, as has the income limit to qualify for the credit.
  • Education Credits: There are two education tax credits available for 2015 Tax Returns:  the Lifetime Learning Credit and the American Tax Opportunity Credit (which may include a refundable portion).
  • Student Loan Interest Deduction: You may deduct a maximum of $2,500.  The deduction begins to phase out with modified adjusted gross income of $65,000 for individual, $130,000 for married filing joint returns.
  • Employer-Provided Parking Benefits: The tax-free amount by which an employer can reimburse you for parking remains at $250.
  • Health Savings Accounts (HSA): H.S.A. contributions for 2015 are $3,350 for an Individual, and $6,750 for family (with a $1,000 catchup for 55 or older).
  • Social Security Benefits:  There was no cost of living increase in 2015. Letters from the Social Security Administration should be coming in the mail if not already received to provide any updated benefit information.
  • Retirement Plan Contributions: The limits on contributions to several types of retirement plans remain unchanged for 2016. The limits for 401(k), 403(b), and 457 plans, and for the Thrift Savings Plan for 2015 and 2016 is $18,000, plus another $6,000 if you are 50 or older by the end of the year.
  • Estate Tax: The Estate Tax exclusion amount (the amount of inheritance that is protected from the Estate Tax) has increased from $5,430,000 in 2015 to $5,450,000 in 2016.
  • Gift Tax:  The annual gift tax exclusion amount remains the same for 2016 at $14,000.  This is the amount an individual can gift to each person and be excluded from filing a gift tax return.
  • Charitable Donations from IRA Distributions: this provision has official been made permanent, allowing individuals of at least 70 ½ years of age to exclude from gross income qualified charitable distributions from IRAs for up to $100,000 per taxpayer.
  • Business Equipment Purchases
    • Bonus Depreciation – Businesses that acquire and place in service new qualified property from 2015 until 2017 will get to claim 50% bonus depreciation in the year placed in service. The bonus depreciation amount is set to decrease to 40% in 2018 and 30% in 2019 and then expire thereafter.  Qualified property includes tangible personal property with a recovery period of 20 years or less, non-residential leasehold improvement property, most computer software, and water utility property.  Retail improvements and restaurant property are ineligible.
    • Section 179 Election – Business are permitted to deduct up to $500,000 of the cost of qualifying property placed in service for the taxable year as of 2015, as long as the total amount of qualified property placed in service does not exceed $2,000,000 in which the deduction would start to phase out. The election cannot create a business loss, and the excess can be carried forward indefinitely.  This election applies to tangible property, and as of 2015, it includes computer software purchased off the shelf, qualified (non-residential) leasehold improvements, qualified restaurant improvements, and qualified retail improvements.  Section 179 is not allowed for property used in connection with residential rental property.
    • De Minims Safe Harbor – A safe harbor exists to deduct the purchase of tangible property of up to $500 per item, or $500 per invoice if items on invoice are not separately stated, in the year of purchase.
  • Discharge of qualified principal residence indebtedness: The provision extends through 2016 the exclusion from gross income of a discharge of qualified principal residence indebtedness. The provision also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged in 2017, if the discharge is pursuant to a written agreement entered into in 2016.

 

For a full list of all items included in the 2015 PATH ACT, please click here.

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