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The tax season following any major election is always filled with numerous surprises and potential causes for concern. In the run-up to the 2014 elections numerous changes were implemented to the US tax code in an effort to gain support for campaign donations by individuals running for reelection. Additionally, numerous flaws in legislation were not fixed creating a powder keg of potential tax increases that will be felt by the already struggling middle-class. Here are ten changes that will impact tax returns for millions of Americans this year.
American Cares Act Penalties Kick In
This law has been a matter of public debate since it was passed in 2009. The final component of it is finally becoming active, in which individuals without insurance have to pay a fine that will gradually increase until it reaches the amount a basic health insurance plan will cost. This is done in the hopes that people will avoid attacks and purchase health insurance.
Increases To the Income Tax Rate
A new tax bracket, 39.6%, is now in full force for the 2015 filing season. It targets those making well above the median income, with the lower amounts being $406,750 for unmarried individuals and $457,600 for married couples. These policies are designed to help reduce the disparity between the 1% in the rest of the nation.
Standard Deduction Increase
The standard deduction has increased to $6,300 for single filers and $12,600 for married couples filing jointly. This is a modest increase of $100, and $200, respectively.
The alternative minimum tax has to be manually increased every year due to a flaw in the original law. This year the increase is by 1.5%, or $56,600 for single people. This law is designed to ensure that everyone pays at least some tax, especially those with resources to avoid most tax regulations.
Social Security and Medicare Increases
The amount of wages subject to Social Security taxes has been increased by nearly $4,000. Additionally, there is a new .9% tax for Medicare on incomes in excess of $200,000 for single filers.
Estate and Gift Tax
The basic tax rate for gifts and inheritances above the exclusion levels has increased to 40%. This is designed to prevent the rise of an “American nobility” that will use inherited wealth separate themselves from society as a whole.
Capital Gains Tax Stabilizes
Those in the 10% and 15% tax brackets will pay 0% on most dividends and capital gains. The 39.6% tax bracket will pay 20%.
Limits to IRA Rollovers
Only one IRA rollover is considered tax exempt for this filing year. This is a change from previous years, where there were no restrictions on the number of changes allow.
Additional Freedoms for Flexible Spending Accounts
If you carry over funds from the previous year, you’ll be disallowed from participating in a HSA in 2015.
Tax Brackets Adjusted for Inflation
Tax brackets have been adjusted upwards to account for inflation, by an average of just slightly under 2%.
When preparing your taxes remember you can e-file your federal taxes free.