4 Major Tax Law Changes In 2015 worth knowing!
Here are 4 of the 2015 key changes taxpayers need to know regarding their tax returns. These are as follows;
1.Higher Employer Plan Contribution Limits:
Taxpayers will be able to contribute up to $18,000 to their 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan in 2015. The catch-up contribution limit will also increase to $6,000 in 2015 for a total contribution limit of $24,000 for employees age 50 and older.
2.Higher Income Limits for IRA Contributions
Income limits for deductible contributions to IRAs depends on whether the taxpayer and/or his or her spouse are eligible to participate in an employer-sponsored retirement plan. The tax deduction for making a traditional IRA contribution is phased out for Individual taxpayers who have a workplace retirement plan and a modified adjusted gross income of more than $61,000 but less than $71,000 for individuals, and more than $98,000 but less than $118,000 for couples in 2015.
For individuals who don’t have a workplace retirement plan but are married to someone who does, the tax deduction for an IRA contribution is phased out if the couple’s income is more than $183,000 but less than $193,000 in 2015. The maximum contribution for an IRA has not changed for 2015 and remains at $5,500 for people under 50, with an additional catch-up of $1,000 for those 50 and older for a total of $6,500.
3.Higher Income Limits for Roth IRA Contributions
The income limits for contributing to a Roth IRA will increase by $2,000 in 2015. The new limits are $116,000 or more but less than $131,000 for individuals, and $183,000 or more but less than $193,000 for married couples.
Taxpayers are permitted to have both a traditional and Roth IRA, but taxpayers can only contribute a maximum of $5,500 (or $6,500 if they are ’re 50 or older) across both accounts each year.
4.Limitation on IRA Rollovers
Beginning on Jan.1, 2015, taxpayers are limited to one rollover from one IRA to another in any 12-month period. A second IRA-to-IRA rollover in a single year could result in income tax becoming due on the rollover, a 10% early withdrawal penalty, and a 6% per year excess contributions tax, as long as that rollover remains in the IRA. This is essentially a limit on what has been typically called an ‘indirect rollover’—where an IRA owner takes a distribution of all or part of the account and moves it into a new IRA.
However, there is no limit on trustee-to-trustee transfers between IRAs or conversions from traditional to Roth IRAs in the same year. This transfer method, also known as a direct rollover allows taxpayers to move IRA funds between accounts without taking control of the money, similar to how taxpayers would roll a 401(k) into an IRA.