Posted on: 15 April 2015Share
2015 ushered in a year of substantial changes to the United States tax code. Everything from the income tax brackets to the maximum allowable IRA contributions was changed, but the changes will have different effects on those with different levels of income, whether those filing are single or married, and whether those filing contribute to 401(k) plans or IRAs.
If you aren't a tax professional, you might not understand what all of the changes ultimately mean for your deductions, contributions, and so forth, so it's important to hire a tax preparation service to ensure things are handled properly. This article outlines two of the biggest ways the tax code changed and how they might affect your tax filings come 2016. (This year, your filings will still be subject to tax rules in effect prior to January 1, 2015).
Spike In Employer Contribution Limits
Effective 2015, employers will be able to match employee contributions to 401k retirement plans up to $18,000 per year. This is up from $17,500 last year, and those individuals over 50 are eligible for an additional $500 in matching contributions through what is known as "catch-up contributions".
The catch-up contribution is designed specifically to help those who are closer to retirement built their nest egg more quickly. And while catch-up contributions are nothing novel, the increase in maximum allowable "additional" contributions from $5,500 to $6,000 is definitely a welcomed change in the tax code.
Ultimately, these increases mean employees have the opportunity to invest up to $1,000 additional dollars each year; $500 from their own pocket, and another $500 their employer matches. Individuals over 50 can put away an additional $2,000 compared to years prior.
Increased Income Limits For IRA Deductions
In 2015, the government decided it would allow individuals to earn slightly more income and still take advantage of certain IRA deductions before reaching the "phase out" limit. Individuals and couples are phased out of such deductions when they earn in excess of a given dollar amount.
In 2014, individuals and couples could earn between $60,000 and $70,000 and between $96,000 and $118,000, respectively, before they lost the opportunity to take deductions on contributions to their IRA account. However, in 2015, individuals can earn between $61,000 and $71,000, and couples between $98,000 and $118,000, before they are phased out of their deduction opportunities. This means that single earners can earn an extra $1,000, and married couples can earn an extra $2,000 each year without forgoing the ability to make deductions from IRA contributions.
As useful as this information is, without consulting a qualified tax preparation specialist, you might not have known what opportunities were available to you this upcoming tax season. Enlisting the service of an experience tax professional can ensure you take the maximum deductions and make the maximum contributions possible to help build for the future.