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7 Income Tax Changes You Need to Know

Filed under: Taxes and Planning

Withdrawing Savings Account Funds ConceptsEvery spring, you find yourself staring at the same old tax forms. But as you know, the regulations behind those forms change from one year to the next. As you get started on this year’s federal income taxes, here are seven changes that you need to know.

Deadline. In the past, the deadline to file your tax return was usually April 15. This year the deadline is Monday, April 18. For those living in Maine or Massachusetts the deadline is April 19. Of course, if you can’t file your return by the deadline, you can ask for a six-month extension.

Health insurance penalties have risen. The penalty for failing to purchase health insurance was relatively low for 2014, but has risen this year. If you didn’t purchase health insurance during 2015, your penalty will be 2 percent of household income OR $325 per adult and $162.50 per child (up to a maximum of $975). Of course, you might also qualify for one of the exemptions from the penalty; check with your tax professional.

The Alternative Minimum Tax exemption has risen. The AMT is designed to ensure that everyone pays at least some income tax. The exemption was increased this year from $52,800 to $53,600 for singles, and from $82,100 to $83,400 for married couples.

Mileage rates have changed. If you deduct vehicle mileage on your income tax return, take note of these new rates: 57.5 cents for business miles, 23 cents per mile for medical or moving expenses, and 14 cents per mile for charitable work.

The personal exemption has changed. You can deduct $4,000 from taxable income for each person on the return.

Some tax breaks were made permanent. From one year to the next, Americans have no idea if the enhanced Child Tax Credit, American Opportunity Tax Credit, and Earned Income Tax Credit will still be available. As of this year, those tax credits have been made permanent.

Certain changes were made in response to the mortgage crisis. If you performed a short sale on an “underwater” home and your loan balance was forgiven, you won’t owe taxes on that money. In past years it would have been considered income. This tax break only applies to primary residences, however.

Many decisions which affect your income taxes, such as your retirement plan contributions and distributions, were already made last year. For help maximizing your income in future years, call us to schedule an appointment. We can help you locate the best tax-advantaged ways to save for retirement – or withdraw those funds when you do retire.