While everyone anxiously awaits the fate of popular tax extenders like bonus depreciation and the increased business expensing election, the IRS and the Social Security Administration have released various inflation-adjusted figures for 2015. While most figures will increase slightly in 2015, some, such as the annual gift exclusion, remain unchanged.
Tax Rate Tables
The highest marginal tax rate for individuals of 39.6 percent applies in 2015 to taxable income over $464,850 for married couples filing jointly ($413,200 for single taxpayers). This is an increase of $7,250 ($6,450) over 2014 levels. See the end of this article for all of the individual and estate/trust income tax rate tables for 2015.
The thresholds related to the 3.8% Medicare tax on unearned income and the 0.9% Medicare tax on wages and self-employment income remain unchanged for 2015 ($250,000 for married couples filing jointly; $200,000 for single filers) as these amounts are not indexed for inflation. Estates and trusts enjoy a slight increase in the 3.8% Medicare tax threshold, however, since that threshold is equal to the dollar amount at which the highest income tax bracket begins.
Alternative Minimum Tax (AMT)
For 2015, the AMT exemption increases from $82,100 to $83,400 for married couples filing jointly and from $52,800 to $53,600 for single filers. The AMT exemption is reduced by 25 percent of the amount by which alternative minimum taxable income exceeds $158,900 for married couples filing jointly ($119,200 for single taxpayers).
For 2015, the 28 percent AMT rate applies to excess alternative minimum taxable income above $185,400 ($92,700 for married taxpayers filing separately).
Exemptions
The personal exemption and the dependency exemption are $4,000 for 2015. Personal exemptions phase out beginning at an adjusted gross income (AGI) level of $309,900 for married couples filing jointly ($258,250 for single filers) and are completely phased out at an AGI level of $432,400 for married couples filing jointly ($380,750 for single filers).
Overall Limitation on Itemized Deductions
Individuals with AGI in excess of certain thresholds must reduce the amount of allowable itemized deductions by the lesser of 3% of the excess of AGI over those thresholds, or 80% of the total amount of otherwise allowable itemized deductions. For 2015, that threshold is $309,900 for married couples filing jointly ($258,250 for single filers).
Standard Deduction
The standard deduction for married couples filing a joint return is $12,600 for 2015. The standard deduction for single individuals and married couples filing separate returns is $6,300 for 2015. The standard deduction for heads of household increases to $9,250 for 2015.
Estate and Gift Tax
For 2015, the lifetime exclusion from estate and gift tax has increased from $5,340,000 to $5,430,000.
The annual gift tax exclusion in 2015 remains unchanged at $14,000. Gift splitting allows married couples to give up to $28,000 to a person without making a taxable gift. The exclusion for gifts to a spouse who is not a citizen of the United States increases to $147,000 for 2015.
Education
The Hope Scholarship credit (American Opportunity Tax Credit) is equal to 100 percent of the amount of qualified tuition and related expenses not in excess of $2,000, plus 25 percent of those expenses that exceed $2,000 but do not exceed $4,000. The maximum credit for 2015 is $2,500. For tax years beginning in 2015, this credit begins to phase out for single individuals whose modified adjusted gross income (MAGI) exceeds $80,000 and at $160,000 for married couples filing joint returns.
For tax years beginning in 2015, the Lifetime Learning Credit begins to phase out for single individuals whose MAGI exceeds $55,000 and at $110,000 for married couples filing joint returns. This credit is completely phased out at MAGI of $65,000 for single individuals and $130,000 for married couples filing joint returns.
For 2015, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for single individuals with MAGI in excess of $65,000 and for married couples filing joint returns with MAGI in excess of $130,000. The deduction is completely phased out for single individuals with MAGI of $80,000 or more and for married couples filing joint returns with MAGI of $160,000 or more.
Children
For 2015, the amount used to reduce the net earned income reported on a child's return subject to the kiddie tax is increased from $1,000 to $1,050. The same $1,050 amount is used to determine if a parent may elect to include a child's gross income in the parent's income and to calculate the kiddie tax.
Foreign Earned Income
For individual taxpayers who work overseas, the amount of foreign earned income that may excluded from taxation increases from $99,200 to $100,800 in 2015.
COLA Limits for Qualified Plans
The cost of living adjustments (COLAs) affect the maximum limits for a variety of contributions and distributions for 2015, including defined benefit accounts, 401(k)s, and other defined contribution plans, as well as limits on employee stock ownership plans (ESOPs) and benefits to highly-compensated employees.
Defined contribution plans
The limits on elective deferrals to 401(k)s, 403(b)s, certain 457s, and the federal government's Thrift Savings Plan increased $500 to $18,000 for 2015. The limit on annual additions to defined contribution plans increases for 2015 from $52,000 to $53,000.
Defined benefit plans and ESOPs
The maximum amount a defined benefit plan may pay a participant each year remains unchanged at $210,000 for 2015. The amount for determining the maximum ESOP account subject to a five-year distribution period increases from $1,050,000 to $1,070,000 in 2015. The dollar amount used to determine the lengthening period of the five-year distribution remains unchanged at $210,000 for 2015.
Compensation Related Limits / Definitions
The annual compensation limit relating to the maximum compensation counted for an eligible employee in a qualifying plan increases from $260,000 to $265,000 for 2015. The limitation used in the definition of a highly-compensated employee increases by $5,000 to $120,000. The dollar limitation concerning the definition of key employee in a top heavy plan remains unchanged in 2015 at $170,000. The compensation amount relevant to the definition of control employee for fringe benefit valuation purposes in 2015 remains unchanged at $105,000 for officers and increases from $210,000 to $215,000 for other employees.
Individual Retirement Accounts (IRAs)
Eligible taxpayers can contribute up to $5,500 to an IRA (excluding catch-up contributions discussed below). For taxpayers who are active participants in an employer-sponsored retirement plan, the deduction for making contributions to a traditional IRA is phased out for single taxpayers who have modified adjusted gross income (MAGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing a joint return, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $98,000 to $118,000 in 2015, up from $96,000 to $116,000. For married couples filing a joint return, in which the spouse who makes the IRA contribution is not an active participant in an employer-sponsored retirement plan but the other spouse is a participant, the deduction is phased out if the couple's income is between $183,000 and $193,000, up from $181,000 and $191,000 in 2014.
The MAGI phase-out range for taxpayers making contributions to a Roth IRA in 2015 is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000. For single taxpayers, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000 in 2014.
Catch-up contributions
Eligible individuals age 50 and above may make catch-up contributions to IRAs, 401(k)s and other savings arrangements. The catch-up amount for 401(k)s, 457s, 403(b)s, and SEPs increases by $500 to $6,000 for 2015. The $1,000 catch-up amount for IRAs is not indexed for inflation.
SIMPLE plans
The elective deferral limit for a SIMPLE plan increases to $12,500 from $12,000 in 2015. The $2,500 catch-up amount for SIMPLE plans is not indexed for inflation.
Social Security Wage Base Increases for 2015
The maximum amount of earnings subject to Social Security will increase in 2015 from $117,000 to $118,500. The Social Security Administration also reported that Social Security and Supplemental Security Income benefits will increase 1.7 percent in 2015.
We have only summarized the most common inflation adjustments here. For more information, please click on the links below.
2015 Tax Rate Tables
| Married Individuals Filing Joint Returns and Surviving Spouses |
| If Taxable Income Is: | The Tax Is: |
| Not over $18,450 | 10% of the taxable income |
| Over $18,450 but not over $74,900 | $1,845 plus 15% of the excess over $18,450 |
| Over $74,900 but not over $151,200 | $10,312.50. plus 25% of the excess over $74,900 |
| Over $151,200 but not over $230,450 | $29,387.50 plus 28% of the excess over $151,200 |
| Over $230,450 but not over $411,500 | $51,577.50 plus 33% of the excess over $230,450 |
| Over $411,500 but not over $464,850 | $111,324 plus 35% of the excess over $411,500 |
| Over $464,850 | $129,996.50 plus 39.6% of the excess over $464,850 |
| Unmarried Individuals (other than Surviving Spouses and Heads of Households) |
| If Taxable Income Is: | The Tax Is: |
| Not over $9,225 | 10% of the taxable income |
| Over $9,225 but not over $37,450 | $922.50 plus 15% of the excess over $9,225 |
| Over $37,450 but not over $90,750 | $5,156.25 plus 25% of the excess over $37,450 |
| Over $90,750 but not over $189,300 | $18,481.25 plus 28% of the excess over $90,750 |
| Over $189,300 but not over $411,500 | $46,075.25 plus 33% of the excess over $189,300 |
| Over $411,500 but not over $413,200 | $119,401.25 plus 35% of the excess over $411,500 |
| Over $413,200 | $119,996.25 plus 39.6% of the excess over $413,200 |
| Married Individuals Filing Separate Returns |
| If Taxable Income Is: | The Tax Is: |
| Not over $9,225 | 10% of the taxable income |
| Over $9,225 but not over $37,450 | $922.50 plus 15% of the excess over $9,225 |
| Over $37,450 but not over $75,600 | $5,156.25 plus 25% of the excess over $37,450 |
| Over $75,600 but not over $115,225 | $14,693.75 plus 28% of the excess over $75,600 |
| Over $115,225 but not over $205,750 | $25,788.75 plus 33% of the excess over $115,225 |
| Over $205,750 but not over $232,425 | $55,662 plus 35% of the excess over $205,750 |
| Over $232,425 | $64,989.25 plus 39.6% of the excess over $232,425 |
| Heads of Households |
| If Taxable Income Is: | The Tax Is: |
| Not over $13,150 | 10% of the taxable income |
| Over $13,150 but not over $50,200 | $1,315 plus 15% of the excess over $13,150 |
| Over $50,200 but not over $129,600 | $6,872.50 plus 25% of the excess over $50,200 |
| Over $129,600 but not over $209,850 | $26,722.50 plus 28% of the excess over $129,600 |
| Over $209,850 but not over $411,500 | $49,192.50 plus 33% of the excess over $209,850 |
| Over $411,500 but not over $439,000 | $115,737 plus 35% of the excess over $411,500 |
| Over $439,000 | $125,362 plus 39.6% of the excess over $439,000 |
| Estates and Trusts |
| If Taxable Income Is: | The Tax Is: |
| Not over $2,500 | 15% of the taxable income |
| Over $2,500 but not over $5,900 | $375 plus 25% of the excess over $2,500 |
| Over $5,900 but not over $9,050 | $1,225 plus 28% of the excess over $5,900 |
| Over $9,050 but not over $12,300 | $2,107 plus 33% of the excess over $9,050 |
| Over $12,300 | $3,179.50 plus 39.6% of the excess over $12,300 |
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