5 Tax Law Changes You’ll Want to Watch Out for This Tax Season
If you’re saving for retirement, 2015 is shaping up to be an important year, with new guidelines from the IRS that will give you more tax-advantages on your savings accounts. However, while the changes may mean many of you will be eligible to contribute more, new restrictions require a bit of planning ahead.
Here are 5 changes to watch out for this year to get the most out of your saving’s contributions:
1. Higher Employers Plan Contribution Limits
The IRS is raising the limit on how much you can contribute to your 401(k), 403(b) and 457 plans based on how much you earn. The contribution limit was raised from $16,500 in the years 2009-2011, to $17,000 in 2012, to $17,500 in 2014 and now to $18,000. The catch up contribution limit – which is applicable only to employees aged 50 years or older – will also increase from $5,500 to $6,000 this year.
2. Higher Income Limits for IRA Contributions
Limits for deductible contributions to your IRA vary based upon whether or not you and/or your spouse are eligible for an employer-sponsored retirement plan. The income limit was raised to more than $69,000 in 2013 for individuals, to $71,000 in 2015. Similarly, the limit was raised from $115,000 to $180,000 for couples in 2015. These are based on maximum modified adjusted gross incomes (MAGI), and whether or not you receive a full or partial deduction depends on how much less your MAGI is than the limit.
If you don’t have an employer-sponsored retirement account but your spouse does, the tax deduction for your IRA contribution doesn’t count if your joint income is more than $183,000 but less than $193,000 in 2015.
The maximum contribution for an IRA did not change this year, and still remains at $5,500 for those under 50 years of age, and $6,500 for those 50 plus years old.
3. Higher Income Limits for Roth IRA Contributions
You can contribute $2,000 more to your Roth IRA in 2015, making the new income limits $116,000 or more but less than $131,000 for individuals, and $183,000 or more but less than $193,000 for couples.
Additionally, you can have both a traditional and Roth IRA, but the contribution limit is still $5,500 (or $6,500 if you’re 50+) across both accounts.
4. Limitation on IRA Rollovers
Beginning on January 1of this year, you can only use one rollover from one IRA to another in a 12-month period of time. Should you commit two rollovers in a single year, you could be subject to a 10% early withdrawal penalty and a 6% per year excess contributions tax, as well as be liable to pay your income tax at the time of the rollover.
5. Changes in Health Expense Accounts
Many people use FSAs – or Flexible Spending Accounts – to pay for their medical expenses, because FSAs allow you to save pre-tax dollars. However, whatever money you put into the account must be used within the calendar year.
Since 2013, you’ve been allowed to rollover $500 of unused funds into the next year plan. While that is not to change this year, what has changed is the restriction this benefit places on Health Savings Accounts.
If you choose to rollover $500 of your unused money at the end of the year, you will be ineligible to participate in an HSA. Based on this new restriction, you may want to weigh the pros and cons of setting up an HSA versus saving that $500 from your FSA.
The yearly contribution limit on employer-sponsored FSAs has been raised $50…from $2,500 to $2,550.
1) You will be able to contribute up to $18,000 to your 401(k) this year.
2) You are limited to one indirect rollover a year starting this year. .
At IRSALLSTAR, we understand that tax preparation is difficult enough without throwing in all of the New Year’s changes. We don’t want you to miss out on any savings opportunities because of the changes, which is why we offer tax preparation assistance. One of our seasoned tax professionals will assist you with your tax return this year, and will help you get all of the deductions, exemptions and credits you’re entitled to. Visit http://www.irsallstar.com/our-services#16 to see how we can help you make sense of all the changes to the tax code and get the most of your 2014 return.