Friday, December 26, 2014

Seven Big Tax Changes in 2015 ... Do you Know What They Are? ...

As 2014 draws to a close, it's nearly time for the annual deluge of tax forms – including 1098's reporting mortgage interest or W-2's from employers reporting your annual wages.
But while gathering documents for the past year's taxes is important, equally pressing is the need to adjust your budget to account for changes in the tax code that take effect starting on New Year's Day.
After all, you have been paying taxes and making retirement contributions all year even though taxes don't need to be filed until the following April. While there are a handful of last-minute strategies to play catch up on 2014 tax obligations, the sad reality is that many folks who have waited until now to think about their taxes are too late.
A better strategy is to plan ahead based on what you think you will owe the Internal Revenue Service, and be proactive on your withholding and savings strategies.
Regardless of what your situation looks like in 2014, here are seven big changes that will affect a large number of taxpayers starting in January 2015.
Health Insurance Penalty: Part of the Affordable Care Act mandates that all Americans have health insurance, or pay a tax penalty as a result. In 2014, the penalties are 1% of your household income or $95 per person – whichever is greater. But in 2015, those penalties ramp up significantly to 2% of total household income, or $325 per person. That can really add up for a middle-class family of four. If you're not covered and paying a penalty on your 2014 taxes, make sure you get health insurance ASAP to avoid penalties as we enter a new tax year in January.
401(k) Limits: The limit on employee contributions to a 401(k) plan will increase to $18,000, up $500 from 2014's cap. That means you tell your payroll department to adjust up your contribution starting on the first of the year to ensure you save the maximum allowable in 2015. Also, the "catch-up" allowance for those over than 50 has also been increased, allowing for an additional $6,000 in contributions instead of the $5,500 cap previously. These new contribution levels are also applicable to 403b accounts and most 457 retirement plans as well.
Read the other 5 Changes HERE.

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