Key Numbers for 2015 Taxes

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Alternative minimum tax (AMT) 2014 2015
Maximum AMT exemption amount $82,100 (MFJ) $52,800 (Single/HOH) $41,050 (MFS) $83,400 (MFJ) $53,600 (Single/HOH) $41,700 (MFS)
Exemption phaseout threshold $156,500 (MFJ) $117,300 (Single/HOH) $78,250 (MFS) $158,900 (MFJ) $119,200 (Single/HOH) $79,450 (MFS)
26% rate applies to AMT income (AMTI) at or below this amount (28% rate applies to AMTI above this amount) $182,500 ($91,250 if MFS) $185,400 ($92,700 if MFS)

 

Exemptions/itemized deductions 2014 2015
Personal & dependency exemptions $3,950 $4,000
Phaseout threshold for exemptions and itemized deductions $305,050 (MFJ) $279,650 (HOH) $254,200 (Single) $152,525 (MFS) $309,900 (MFJ) $284,050 (HOH) $258,250 (Single) $154,950 (MFS)

 

Standard deduction 2014 2015
Standard deduction amount $12,400 (MFJ) $9,100 (HOH) $6,200 (Single) $6,200 (MFS) $12,600 (MFJ) $9,250 (HOH) $6,300 (Single) $6,300 (MFS)
Standard deduction for dependent Greater of $1,000 or $350 + earned income Greater of $1,050 or $350 + earned income
Additional deduction for aged/blind $1,550 (single or head of household) $1,200 (all other filing statuses) $1,550 (single or head of household) $1,250 (all other filing statuses)

QCDs for 2014. Absent new legislation, however, QCDs cannot be made for 2015.

Top tax brackets 2014 2015
Single 39.6% of taxable income exceeding $406,750 + $118,118.75 39.6% of taxable income exceeding $413,200 + $119,996.25
MFJ 39.6% of taxable income exceeding $457,600 + $127,962.50 39.6% of taxable income exceeding $464,850 + $129,996.50
MFS 39.6% of taxable income exceeding $228,800 + $63,981.25 39.6% of taxable income exceeding $232,425 + $64,998.25
HOH 39.6% of taxable income exceeding $432,200 + $123,424 39.6% of taxable income exceeding $439,000 + $125,362

 

 

Long-term capital gains andqualifying dividends1 generallytaxed at maximum rate of: 2014 2015
Taxpayers in top (39.6%) tax bracket 20% 20%
Taxpayers in 25%, 28%, 33%, and 35% tax rate brackets 15% 15%
Taxpayers in tax rate bracket 15% or less 0% 0%

1 Generally, qualifying dividends are dividends received by an individual shareholder from domestic and qualified foreign corporations

Unearned income Medicare contribution tax (Net investmentincome tax) 2014 2015
Amount of tax 3.80% 3.80%
Applies to lesser of (a) net investment income or (b) modified adjusted gross income exceeding:
Individuals $200,000 $200,000
Married filing jointly $250,000 $250,000
Married filing separately $125,000 $125,000

 

Standard mileage rates 2014 2015
Use of auto for business purposes (cents per mile) $0.56 $0.575
Use of auto for medical purposes (cents per mile) $0.235 $0.23
Use of auto for moving purposes (cents per mile) $0.235 $0.23
Use of auto for charitable purposes (cents per mile) $0.14 $0.14
Qualified charitable distributions (QCDs) Qualified charitable distributions (QCDs) are distributions made directly from an IRA to a qualified charity. Such distributions may be excluded from income and count toward satisfying any required minimum distributions (RMDs) you would otherwise have to receive from your IRA. Individuals age 70½ and older could make up to $100,000 in 

Provisions that are extended through 2014and then expire

  • Increased Internal Revenue Code (IRC) Section 179 expense limits ($500,000 maximum amount decreases to $25,000 in 2015) and “bonus” depreciation provisions
  • The $250 above-the-line tax deduction for educator classroom expenses
  • The ability to deduct mortgage insurance premiums as qualified residence interest
  • The ability to deduct state and local sales tax in lieu of the itemized deduction for state and local income tax
  • The deduction for qualified higher education expenses

 

Key Numbers for 2014 Taxes

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Standard Deductions

Married Filing Joint- $12,400

Married Filing Seperately- $6,200

Head of Household- $9,100

Single – $$6,200

 

Personal Exemptions are now $3,950 (up from $3,900 in 2013)

 

Qualified Plans:

Maximum elective deferral

401k, 403b, etc – $17,500

SIMPLE IRA – $12,000

Keogh and SEP IRAs – $52,000

Catch up contributions (individuals who will be at least age 50 by the end of the year)

401k, 403b, and 457 plans- $5,500

SIMPLE IRA – $2,500

ROTH IRA and Traditional IRA Contribution Limits:

Regular- $5,500

Catch Up- $1,000

 

Mileage Rates:

Business = 56 cents per mile

Medical = 23.5 cents per mile

Charitable = 14 cents per mile

Moving = 24 cents per mile

New Tax Laws for 2013

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Here are a few of the provisions in the Fiscal Cliff Bill and the tax laws for 2013.

• Filers making below $110,000 can still deduct mortgage insurance premiums through 2013–plus this was made retroactive to cover 2012.

• Mortgage cancellation relief–which is for home owners or sellers who have some amount of their mortgage debt (on their primary residence) forgiven by their lender in a situation such as a short sale, foreclosure or modification–was extended for one year to January 1, 2014.

• The 10% tax credit (limited to $500) for homeowners for energy improvements (energy efficiency tax credit) to existing homes is extended through 2013 and made retroactive to cover 2012.

• The rate for Capital Gains will remain at 15% for individuals at the top income amount of $400,000 and $450,000 for a joint return. Gains over and above these amounts will be subject to a 20% tax. Remaining in place is the $250/500K exclusion for the sale of a principal residence.

• Individual estates will have the first $5 million dollars exempted and family estates will have $10 million exempted.

• Qualified leasehold improvements on commercial properties have been extended through 2013 and retroactive to cover 2012 and are subject to a 15 year straight-line cost recovery.

To understand how all of this impacts your individual situation, feel free to contact us anytime at 651-647-4935.

Updated Education Credits

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Education Credits Available

—-Credit———————-2013 Credit

Lifetime Credit               $2,000

American Opportunity     $2,500

Tuition Deduction          up to $4,000 deduction

2013 Phase out——American Opp Credit———-Lifetime Credit

MFJ                             $160k-$180k                     $107k-$127k

Sigle & HOH              $80K-$90K                        $53K-$63K

MFS                      —Credits not available—

Updated Standard Mileage Rates

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Standard Mileage Rates

————————-2013————————-2014————————

Business        56.5 cents          56 cents

Medical          24 cents              23.5 cents

Charity           14 cents               14 cents

Moving           24 cents                23.5 cents

New Alternative Minimum Tax (AMT) Data

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—————————2012 Exemption———–2012 Phase-out——————–

Married
Filing Joint             $45,000              $150,000-$330,000

 

Single &
Head of Household  $33,750            $112,500-$247,500

 

Married
Filing Seperate        $22,500              $75,000-$165,000

Safe Tax Tactics

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As a self-employed person, you are three times more likely than an employee who receives a W-2 form to be audited by the Internal Revenue Service, according to 2005 data from the IRS. Combine that with the fact that the number of audits of small corporations has been on the rise in the last few years, and you have the potential for a real hassle. But don’t despair; there are several things you can do to reduce your chances of being audited and to protect yourself in the event that you are.

File OH time. Make sure you file both your income tax return and quarterly estimates before the deadlines. Nothing throws up a red flag and says “audit me” more than consistently filing your returns and quarterlies late. If you can’t file on time, be sure to file an extension. Remember, though, that extensions don’t eliminate interest charges.

Keep good records. One particularly vexing issue for salespeople who use their cars for business is substantiating business mileage with a properly documented mileage log. Few mileage logs are up to IRS standards. The IRS will accept either paper or computer-generated logs, but the IRS tends to view computer logs as less credible. (You can find my version of a paper mileage log, called The Audit Angel, for $19.99 at my Web site, www.bergersontax.com)

Double-check meal and entertainment deductions. Meal and entertainment costs are deductible up to 50 percent if they are ordinary (commonly done) and necessary to your business and are either directly related to the active conduct of your business or directly preceding or following a substantial business discussion on a subject associated with your business. Ordinary and necessary costs are those considered helpful and common practice in your industry. You can entertain business associates in nonbusiness settings such as restaurants, theaters, sporting events, and nightclubs, provided the entertainment directly precedes or follows a business discussion. Business associates would include clients, prospective clients, suppliers, employees, partners, or advisers. You should document where the meeting was held, with whom, and the purpose of the meeting. Keep this information with the receipt.

Classify your workers properly. A top audit trigger is a business-such as a real estate brokerage-that treat workers as independent contractors. Questions are more likely to arise about the employment status of office personnel or assistants working for salespeople. If the IRS rules that these workers are employees, you could owe employment taxes, penalties, and interest. While federal tax law provides a safe harbor that classifies real estate salespeople as independent contractors, unlicensed assistants do not have such protection. One important factor in determining independent contractor status is behavioral control, or to what degree workers control how, where, and when they work. If a worker receives extensive instructions on how work is to be done, it suggests employee status. If a worker receives benefits such as paid leave, health insurance, or a retirement package, this might also indicate employee status. For further details on the distinctions between independent contractors and employees, go to www.irs.gov/business and read Publication 1779.

Review IRS audit guides. Audit technique guides were developed by the IRS to assist its agents in performing examinations. These guides contain examination techniques, industryissues, business practices, industry terminology, and other information to assist examiners in performing audits for particular industries. These guides are available to the public at the IRS Web site so you can obtain them and learn in advance what issues the IRS will examine during an audit.

Get good advice. If you’re not aware of new twists in the country’s constantly changing tax laws, you might cost yourself money. If you have a question regarding possible deductions or how to report income, ask a tax professional or call the IRS directly. The money that you spend for good advice up front can pay you back many times over into the future. Follow these easy steps, and you’ll reduce your chances of an IRS audit. At the very least, you’ll have appropriate backup for your deductions to satisfy even the toughest auditor.

The Top 5 Reasons to Keep a Mileage Log

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  1. Huge Tax Savings!  For 2009 the I.R.S offers a 55 cent/mile deduction for miles driven for work purposes using the standard mileage rate.  Find more information on the standard mileage rate in The Audit Angel 2009, Your Essential Income Tax Organizer & Mileage Log or at www.bergersontax.com under the Tax Answers and Article section. Using a mileage-log allows you to claim the standard mileage rate and take advantage of this generous tax deduction.
  1. The I.R.S. is Cracking Down.  The days of the kinder, gentler I.RS. are over. They have realized that some taxpayers have been exploiting deductions and are not able to validate their deductions in an audit situation.  The I.R.S has hired thousands of new agents to target self-employed individuals and people who use mileage for business purposes as a deduction. Unfortunately many of these audit victims are not prepared and do not have a complete mileage-log and record keeping system to validate their mileage and business related expenses.
  1. Incredibly Easy to Use. Just keep your mileage-log in your vehicle and write down the key pieces of information required by the I.R.S for your business related mileage every time you drive.  At the end of every week or month total up the amount and carry it forward to the end of the year.  At the end of the year deduct the total amount of business miles driven and reap the huge tax deduction!
  1. New IRS Rules. Unlike in the past, the I.R.S now allows you to claim the standard mileage rate on multiple vehicles. Just carry your mileage-log with you in whichever vehicle you use to document the proper information.  To simplify even more, use different color pens for certain vehicles.  Then it will be easy to total the mileage on each vehicle at tax time.

5. Tax-Time Relief. Rather than having to scramble for receipts or to find out how many miles to claim on your taxes you will have everything already documented.  You will never have to worry about if your tax return gets audited because you will easily be able to validate all the key pieces of information that the I.R.S requires.  Simply take the running total of all the business miles driven over the course of the year and claim that amount on your income tax return to receive the generous 55 cents/mile.

Vehicle Donations Info

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Under the new law, allowable deductions for charitable contribtutions of vehicles for which the claimed value is over $500 will depend on how the vehicle is used by the recipient charity. If the chairty sells the vehicle without any significant intervening use or material improvement, the donors deduction is limited to the gross sales proceeds received by the charity. If the charity uses the asset in direct furtherance of its charitable purpose the donor may deduct the “Fair Market Value” of the vehicle. Example: If a vehicle with a “Fair Market Value” of $3,000 is donated to a charity and they sell the vehicle for $1,500, the donor can only deduct $1,500. If the charity provides the vehicle to a disadvantaged person, the donor may deduct the “Fair Market Value” of $3,000.

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