The Internal Revenue Service today announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Highlights include the following:
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
In addition to the inflation-adjusted tax bracket amounts for 2015, the IRS released the official 2015 figures for the following tax benefits and limitations, among others:
Personal exemptions. Personal and dependency exemptions will increase from $3,950 in 2014 to $4,000 for 2015.
Standard deductions. Standard deductions will increase for 2015 to $12,600 for married joint filers (up from $12,400 for 2014) and $6,300 for single filers and married separate filers (up from $6,200 for 2014). For heads of household, the standard deduction will be $9,250 (up from $9,100 for 2014).
Limitation on itemized deductions. For 2015, the amount of itemized deductions that can be claimed will begin to phase out for certain taxpayers whose income exceeds $309,900 (married joint filers); $284,050 (heads of household); $258,250 (single filers); or $154,950 (married separate filers).
Kiddie tax. For purposes of determining whether a child’s unearned income is taxed at the parent’s tax rate under Code Sec. 1(g) the amount by which the child’s net unearned income escapes the kiddie tax increases tax for 2015 to $1,050. The child’s income can be reported on the parent’s return if the child’s gross income is more than $1,050, and less than $10,500. The exemption amount for purposes of the alternative minimum tax cannot exceed the sum of the child’s earned income for the tax year, plus $7,400.
Estate and gift tax. The gift tax annual exemption will remain the same for 2015, at $14,000. However, the estate and gift tax applicable exclusion will increase from $5,340,000 for 2014 to $5,430,000.