The 2014 year is down to its final weeks and, like with any other year, a host of tax changes will greet the taxpayer in the coming year. Retirement funds and related taxes will see the usual new year adjustments for cost of living and inflation, with tax rates staying roughly the same and limits on contributions receiving slight increases. Here are some of the changes slated for 2015:
Social Security– Retirees will receive a 1.7 percent increase in payments in 2015 thanks to a cost of living adjustment. For those who are still working, the tax rate will remain at 6.2 percent. The limit on taxable Social Security wages will increase from $117,000 to $118,500.
Medicare– The Medicare Part B premium will remain fixed at $104.90 monthly in 2015 (high wage earners pay more) and the deductible will remain at $147 per year. Those receiving Medicare assistance for inpatient services will have to pay a larger deductible of $1,260, up from $1,216 in 2014. Medicare Part D premiums will increase and while they vary based on the specific plan, the increase is expected to be about 4 percent. The Medicare tax rate that employees pay will remain at 1.45 percent of income and the added Medicare tax on incomes over $200,000 will remain at an additional 0.9 percent.
401(k)– The 401(k) retirement contribution limit will increase to $18,000 in 2015, up from $17,500 in 2014. The catch up contribution limit, which applies to workers age 50 and up, will increase from $5,500 to $6,000.
IRAs– The annual IRA retirement fund contribution limit will remain at $5,500 in 2015. Workers age 50 and up can contribute an additional $1,000 per year, also unchanged from 2014. Workers who have a 401k or similar retirement plan at work can also contribute to an IRA and enjoy the tax advantages, provided that income remains within certain limits. The limit applies to those with modified adjusted gross income between $61,000 and $71,000 for individuals and $98,000 to $118,000 for couples in 2015. These new limits represent small increases of $1,000 and $2,000, respectively, from last year. If a spouse without a workplace retirement plan is married to someone with a 401(k), he/she can deduct traditional IRA retirement contributions up until their income is between $183,000 and $193,000 in 2015. For those with Roth IRA, the income limits will also increase by $2,000 in 2015, rising to between $116,000 and $131,000 for individuals and $183,000 to $193,000 for married couples.
Saver’s credit– This is a tax credit that applies to workers in lower income brackets. If you save in a 401(k) or IRA retirement plan, you may be eligible for the saver’s credit if adjusted gross income is less than $30,500 for singles, $45,750 for heads of household and $61,000 for married couples in 2015. These limits have been increased from $500 to $1,000 compared to 2014. The credit is worth 50 percent, 20 percent or 10 percent of your 401(k) or IRA contributions up to $2,000 for single tax filers or $4,000 for couples, with the largest tax credit going to savers with the lowest incomes. The maximum saver’s credit a taxpayer can receive is $1,000 for individuals and $2,000 for couples.
MyRa retirement account– This is a new retirement account first introduced in 2014 but not implemented until 2015. The myRA is a Roth retirement account funded with after-tax as opposed to the usual pre- tax dollars via payroll deduction. However, the myRA is not tied to a specific job and is guaranteed by the government not to lose value. The myRA will be available to upper middle income workers, middle income workers, and lower income workers and will apply to those with annual income of less than $129,000 for individuals and $191,000 for couples. The account can be contributed to for up to 30 years or until it reaches $15,000 in value, at which point it will transfer to a private retirement account.
Copyright 2015, Bryan Carey