It’s that time of year again. Holiday celebrations are behind us. New Year’s Eve hangovers have (hopefully) faded. That sometimes-dreaded American rite, April 14, is on the horizon and coming closer, and ignoring it won’t help. It’s time to think about taxes. In addition to routine increases in income brackets and standard deductions to keep up with inflation, here’s a breakdown of recent tax law changes you should be aware of:
• A number of expired tax breaks from 2013 have been “revived” by legislative action for the 2014 tax year, meaning you can claim them on the return you file in 2015. These include the higher education tuition deduction (up to $4,000 of qualified tuition expenses can be deducted), educator expense deductions (up to $250 for classroom expenses), and credits for energy-efficient home improvements. The charitable IRA rollover, which allows those over age 70 ½ to make tax-free distributions of up to $100,000 from their IRA directly to charities, has also been extended for tax year 2014.
• Starting with the 2015 tax year, you will only be allowed one non-taxable IRA rollover annually. Rolling over means taking money out of an IRA and holding it for less than sixty days before putting it into another IRA. (note: moving an IRA from one bank/brokerage/trustee to another is not considered a rollover)
• Contribution limits on certain retirement accounts are increasing for the 2015 tax year. For instance, the annual contribution limit will be $18,000 for a 401(k), plus a $6,000 “catch up” for those turning 50 or older during the year. This is up from $17,500 and $5,500 for tax year 2014 (which was unchanged from tax year 2013).
• The penalty for not having approved health insurance coverage will be as much as $285/family for tax year 2014, rising to as much as $975/family for tax year 2015.
• If you care for someone (such as a child) with physical, emotional or mental disabilities in your home, and receive state aid or Medicaid for it, you may now be able to exclude those amounts from taxable income.
A discussion of all the changes to tax laws, not to mention each of the nuances applicable to your own family’s situation, is beyond the scope of this WEALTHWISE. To get the full picture, consult with your professional tax advisor. If you don’t have one, we can help you find one. And if you do have one, we can enhance their effectiveness by ensuring they are coordinated with all of your other advisors.
At PARTNERSINWEALTH we put you in control of your financial life, so that instead of feeling worry around events such as tax season, you will rest easy knowing that someone has a handle on your complete financial life, improving decision-making by bringing all the diverse aspects together. To learn more about us, please contact Jim Waters, CFP®, at 713.964.4028 or email@example.com.