Every year brings with it tax law changes.
As we start the new year, here are changes that you may need to know about:
The standard deduction that you can take for yourself, a spouse and children when filing your federal taxes will be bigger in 2015.
The standard deduction is a dollar amount that reduces the income on which you are taxed. These deductions are automatically adjusted yearly for inflation. You can’t take the standard deduction if you itemize your deductions on your federal tax return.
The new year also brought with it slight adjustments in the tax brackets that are adjusted for inflation.
It seems like it’s a yearly occurrence that tax breaks on the verge of retiring get saved by Congress just in the nick of time.
This year Congress extended the ability to claim a valuable higher-ed tax credit – the American Opportunity Tax Credit – that can save families up to $2,500 per college student.
The penalty for not having approved health insurance will rise significantly this year. Thepenalty for failing to secure health insurance will be $325 for each adult and $162.50 for each child not to exceed $975 for the total family or 2% of the family’s taxable income.
The Internal Revenue Service will now penalize you if you aren’t smart when moving a retirement account.
In the past, investors could withdraw money from a retirement account without penalty or taxes as long as the money was put into a different retirement account within 60 days. Now individuals can only make this so-called indirect rollover once a year. Investors, however, can move a retirement account anytime they wish as long as the money is moved directly to the next institution. This is called a trustee-to-trustee transfer.
If you have a flexible spending account, you can shelter up to $2,550 from taxes, which represents a $50 increase over 2014. Until recently employees with a FSA would lose any money that wasn’t spent by year’s end, but you can now carry over an excess of $500. This year, however, there is a wrinkle in this ability to carry over an outstanding FSA balance. If you are using a Health Savings Account, you can’t take advantage of the FSA carryover.
The new year ushered in myRA, another way for Americans to save via the federal government. The account is intended to serve as a savings vehicle for the approximately 50% of American workers who don’t have access to an employer-sponsored retirement plan.
Individuals can get started with a minimum contribution of $25 through payroll deduction at their workplaces. The money is invested in Treasury securities. Savers can use the same account when changing jobs or can roll the balance over to a private-sector retirement account. The myRA contribution limits are the same for a traditional or Roth IRA. An employer must sign up for myRA before workers can participate.