Uncertainty is a word that captures the federal tax environment. With the 2016 U.S. election cycle in full bloom, it is difficult to determine which reform or extension bills will be enacted by a partisan Congress, or when. Given that uncertainty, tax planning can be tough. This article should help you get through what we do know will affect your tax posture for 2015.
Please note: The PICPA worked carefully to prepare this article, but it cannot be used as official tax advice that would protect taxpayers from penalty due to the complexity of tax law, individual taxpayer facts and circumstances, and changes enacted after this writing. We encourage taxpayers to seek advice from our member CPAs about the items contained in this article, as well as other tax issues and planning opportunities.
Taxpayers can file as single, married filing jointly, married filing separately, head of household, or qualifying widow(er) if the circumstances legally support the status chosen. If you are married and filing jointly, you can take advantage of certain tax deductions, tax credits, and benefits not available to couples filing separately. Unmarried taxpayers may file as single or, if they qualify, head of household.
For 2015, the top rate is 39.6 percent for single taxpayers making more than $413,200, head of households making more than $439,000, and married filing jointly taxpayers and surviving spouses making more than $464,850 (or $232,425 if married filing separately). Below that, the ordinary income tax rates are 10, 15, 25, 28, 33, and
35 percent, with different brackets for each type of filer.
The Affordable Care Act includes additional Medicare taxes for 2015 on earned income and unearned income. For earned income, the Medicare contribution tax rate on wages, compensation, or self-employment income is an additional 0.9 percent, if that type of income exceeds certain thresholds. The threshold levels for 2015 are $250,000 for married filing jointly ($125,000 if married filing separately) and $200,000 for all other taxpayer filing statuses.
For 2015, the exemption amount has increased to $4,000 for yourself, your spouse, and each of your dependents who are qualifying children or relatives. The exemption is subject to phase-outs beginning at $258,250 (single), $284,050 (head of household),
$154,950 (married filing separately), and $309,900 (married filing jointly); with a complete phase-out at $380,750 (single) and $432,400 (married filing jointly).
The standard deduction amounts have increased slightly for 2015 as follows:
$6,300 if single or married filing separately, $12,600 for married filing jointly or qualifying widow(er), and $9,250 for head of household. Taxpayers who are 65 and older or are blind receive an additional standard deduction of $1,250 for married filing jointly or separately, or $1,550 for single or head of household. For individuals claimed as a dependent on another tax return, the 2015 standard deduction is the greater of $1,050 or $350 plus earned income, not to exceed the standard deduction amount for those who are not dependents.
The American Tax Relief Act (ATRA) of 2012 reduced itemized deductions by 3 percent of any excess adjusted gross income (AGI) over $258,250 (single), $284,050 (head of household), $154,950 (married fi ling separately), and $309,900 (married filing jointly). ATRA also increased the AGI limitation floor from which you can claim unreimbursed medical expense deductions from 7.5 percent of AGI to 10 percent of AGI before such deductions can be claimed. There is a temporary exemption through 2016 for individuals age 65 and older and their spouses, allowing them to continue using the prior 7.5 percent AGI limitation. The 2 percent floor for unreimbursed business expenses and the 10 percent floor for casualty losses in excess of insurance
reimbursements also apply in 2015.
Mileage and vehicle costs can be significant considerations in computing itemized deductions as well. For 2015, the business mileage rate is $0.575 per mile. The medical and moving mileage rate is $0.23, and the charity mileage rate is $0.14 per mile.
More Tax Tips
To learn more tax saving tips for filing your 2015 tax returns, download the full Federal Tax Tips brochure for 2015.