Print Article

Tax Law Changes

Introduction

A new year also brings new changes in U.S. policies that can have an effect on your current financial situation. Proper planning is essential in minimizing taxes and maximizing returns. Outlined below are key Tax Law and Retirement Plan Changes effective for the year 2015.

Tax Laws in Effect

Since 2013, top income earners experienced a substantial increase in investment taxes which have greatly impacted their nominal returns.

Increases included the marginal income tax rate increase from 35% to 39.6% for earners with income over $400,000 (single) / $450,000 (joint), as well as a higher 20% tax rate on qualifying dividends and long-term capital gains. In addition, investors with adjusted gross income of at least $200,000 (single) / $250,000 (joint) also felt the tax effect with a new 3.8% tax on “unearned” net investment income above thresholds due to the Affordable Care Act (ACA). In all, high earners are paying 59%

Retirement Plan Contribution Limits

• Employee elective deferrals into 401(k), 403(b) and most 457(b) plans have increased from $17,500 to $18,000.
• The catch-up contribution limit into a 401(k), 403(b) and most 457(b) plans for those ages 50 and over has increased from $5,500 to $6,000. The total elective deferral maximum for 2014 for those over age 50 is $24,000 for Tax Year 2015.
• The maximum deferral for defined contribution plans has increased from $52,000 to $53,000. Defined contribution plans include deferrals by the employee as well as the employer.
• The limit for annual and catch-up contributions to IRAs remains unchanged at $5,500 and $6,500 for those over age 50.