Tax Updates

Roth Options

In a recent ruling from the IRS… High-incomers can supersize their Roth IRAs. Currently, married filers with adjusted gross incomes below $181,000 and singles with AGIs below $114,000 can contribute up to $5,500 to a Roth IRA…$6,500 if they are age 50 and up. But no contributions are allowed when AGI tops $191,000 or $129,000, respectively. So, those with larger incomes are shut out of Roths, unless they contribute to a Roth 401(k) account. When they leave their employer, they can roll over the amount in the Roth 401(k) to a Roth IRA tax-free. The Roth-building strategy is based on making after-tax contributions to a 401(k). If you are interested in this strategy and have a 401(k) Roth option at your job, contact us for more information.

Will Tax Breaks Be Extended

Will and when will lawmakers revive expired tax breaks?  It appears sometime next month.  A number of tax provisions lapsed after 2013, including the deduction for state sales taxes in lieu of income taxes, direct distributions of up to $100,000 from IRAs to charity, higher ceilings on expensing assets (Section 179), bonus depreciation and the R&D tax credit.  The House wants to make some breaks permanent, including expensing, bonus depreciation and the R&D credit, while the Senate opted for two-year extensions.  The House plan is gaining steam, since many Democrats back those business breaks.

 Obamacare Individual Mandate – Hardship Exemption

Taxpayers must confirm this exemption before filing.  As we have discussed before, folks without health insurance will owe a tax when they file for 2014 unless they have an exemption.  Taxpayers seeking of the the fourteen hardship exemptions must get approval from the exchange before they claim a waiver on their return.  This approval process will take a minimum of two weeks according to the Feds.  Taxpayers must submit a multiple page application and documentation to the exchange.  If the exchange approves the relief, the applicant will receive a certificate number that they can enter on Form 8965 to claim the exemption.

2015 Retirement Plan Limits Increased

Many key dollar limits on retirement plans will be higher in 2015:

  • 401K, 403B – $18,000 / Over age 50 – $24,000
  • SIMPLE Plans – $12,500 / Over age 50 – $15,500
  • Retirement Plan Contributions – based on $265,000 for 2015 with limitations increasing to $53,000
  • Roth IRA phase outs on AGI – $183,000 to $193,000 for couples and $116,000 to $131,000 for singles
  • Deduction phase outs for Traditional IRA’s – $98,00o to $118,00o for couples and $61,000 to $71,000 for singles
  • Contribution caps remain at $5,500 and $6,500 for those 50 and up

Social Security Wage Base

The Social Security wages base is going up in 2015 to $118,500 a $1,500 hike from 2014.  The 0.9% Medicare surtax kicks in for singles with wages exceeding $200,000 and couples earning over $250,000.